House and Senate negotiate tax cuts; details uncertain

TOPEKA — House and Senate negotiators plan to continue their slog through the details of two income tax reduction bills today.

After two days of meetings, the six-member group has yet to formally agree on anything, though they’ve asked legislative researchers to explore the costs of more than a dozen changes to the tax code. The most most expensive aspect of negotiations remains untouched: How much should individual income taxes be reduced?

Still, some themes are emerging.

Senators are poised to agree with House members on phasing out non-wage income taxes for a wide variety of businesses that includes limited liability companies, subchapter S corporations and sole proprietors. Gov. Sam Brownback has pushed for the immediate elimination of that tax and equates it to shooting adrenaline into the hearts of businesses.

But the roughly $180 million per year in lost revenue that would otherwise fund state services has lawmakers searching for ways to ease the sticker shock. The House plan Senators have shown initial support for starts in 2013 with three years of exempting the first $100,000 of non-wage income taxes for those business types. It bumps it up to the first $250,000 of income in 2016 and 2017 before eliminating the tax altogether.

Both House and Senate negotiators agreed that the food sales tax refund available to low-income families should stay in place, instead of being repealed to help pay for the tax cuts. A proposed elimination of sales tax on groceries approved by the House appears unlikely to survive negotiations because it would add about $320 million to the cost of the plan.

The two plans being discussed each cost hundreds of millions of dollars, which many opponents worry would erode essential state services that have already been cut as result of the Great Recession. (more…)