Politics & Government

Tax-cut negotiations break down in Kansas Legislature

Wichita Republican Sen. Les Donovan looked dejected as he left a series of meetings Tuesday that were supposed to produce an alternative to the deficit-inducing tax-cut bill headed toward Gov. Sam Brownback’s desk.

“It looks like we are at a standstill right now,” he said.

Conservative Republicans in the House swiftly batted away three tax-cutting alternatives crafted by the Senate’s moderate Republican leaders Tuesday. Those proposals wouldn’t lead to the $2 billion deficit that the bill awaiting Brownback’s signature would – in fact, they’d leave a surplus.

Donovan said he’s frustrated to see a bill that he worked hard on to make fair for almost all taxpayers get sidelined for what he later called “the worst tax bill ever to come out of” the Statehouse.

But the alternatives wouldn’t cut taxes for as many people as quickly. And they wouldn’t cut taxes as much as a separate plan that House and Senate negotiators agreed on about a week ago.

So House negotiators saw no reason to budge.

The tax battle is part of a larger stalemate between moderate and conservative Republicans that has pushed the session beyond its 90-day limit and extends to such issues as the budget, education spending and redistricting.

Brownback has said he will sign the tax-cut bill that is heading toward him if the Senate doesn’t pass last week’s negotiated tax-cut plan.

That leaves the Senate with two options: Vote on a bill that is not projected to cause a budget deficit, even if that could become problematic if it doesn’t work out, as conservatives predict; or let Brownback sign the other bill and get ready for cutbacks.

Donovan worries that the bill awaiting Brownback’s pen, projected to result in more than a $2 billion deficit by 2017, could leave people in need with fewer services.

“It’s a wonderful idea if you want to cut spending in half in Kansas,” said Donovan, chair of the Senate tax committee. “It’s not what we need. I think most people understand that. But it’s what we’re going to get if we’re not very willing to compromise here.”

Rep. Nile Dillmore, D-Wichita, said the bill would create a “budget catastrophe” that could change the state as we know it.

Lawmakers have reviewed and debated at least a dozen variations of tax-cutting bills in recent weeks. When analysts came back with projected deficits, Republicans tweaked things in hopes of better projections.

Democrats, meanwhile, bristled at proposals to slash income taxes, saying they hear constituents calling for property tax relief and more funding for schools.

Alternatives pitched by moderate Republicans in the Senate on Tuesday would cut individual tax rates to 3.25 percent on married couples’ first $30,000 of income and 5.8 percent on income beyond that. It would make the first $100,000 of nonwage business income tax exempt.

Senate President Steve Morris, R-Hugoton, said that is what he senses could win a majority of votes in the Senate.

Donovan said Morris and others weren’t even interested in taxes until recently, and he said that helped give the House incentive to push through the deficit-inducing plan that now awaits Brownback’s signature.

The Senate’s alternatives are not as attractive to conservatives as the plan negotiators agreed on last week.

That trims individual rates to 3 percent on married couples’ first $30,000 of income and 5.5 percent for any income beyond that. The top rate would drop to 4.9 percent after two years.

That proposal also phases out nonwage income taxes for limited liability companies, subchapter S corporations and sole proprietorships. And it would add $45 million in property tax relief each year, allow a six-tenths-of-a-cent sales tax increase to expire in 2013 and allow low-income Kansans to pick between the earned income tax credit or the food sales tax rebate.

“Under the plan we had a chance to pass, every taxpayer that paid income taxes in the state of Kansas would have gotten a cut,” Donovan said. But he said he doesn’t think the Senate would have approved it anyway.

The Senate was about to vote on that last week.

But conservatives in the House heard the Senate would reject it and used a series of political maneuvers to quickly vote through a version of the governor’s original tax plan that Senate moderates had changed drastically in hopes of making it politically impossible to pass. Senators said they approved that plan only in order to start negotiating a more realistic plan with the House, which had approved its own tax cut bill.

The House maneuvers last week sent that big tax cut bill toward Brownback’s desk. It would eliminate the nonwage business income tax immediately and drop individual income tax rates to 3 percent on the first $30,000 and 4.9 percent thereafter.