Republicans inched closer to an agreement Tuesday on how to bring in more taxpayer money while also cutting income taxes.
But leaders of the dominant political party still seemed scattered on how to explain plans that extend some of the elevated sales tax rate set to expire in July and phase out almost all tax deductions in order to lower income tax rates.
The reality of that complicated discussion set in hard on the 88th day of the 90-day legislative session. That was perhaps best illustrated by wide-ranging opinions expressed by freshman Republicans, who convened on the top floor of the Capitol to dig deep into tax proposals.
There, lawmakers sought to view plans being considered in the context of the massive income tax reductions signed into law by Gov. Sam Brownback last year. That plan veered far off the course Brownback had hoped for, locking in income tax cuts for businesses and individuals without bringing in much new revenue to offset those cuts.
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Now Brownback is asking lawmakers, including a record number of freshmen who didn’t get to vote for last year’s big cuts, to balance those cuts and pay for more income tax reductions by drawing in more revenue.
“Anybody who came here and had the illusion that we weren’t going to have to make these hard decisions, they were incorrect,” said Rep. Mark Hutton, R-Wichita. “We have bent the curve of the debate from how much are we growing government to how much are we cutting government. That’s a phenomenal thing.”
Hutton presented his own plan that sought to ease the burden on the poor caused by the elevated sales tax while also continuing to cut rates.
That proposal would drop sales tax on food from the current 6.3 percent to 4.95 percent, below the 5.7 percent rate Kansans paid prior to the temporary increase approved in the wake of the recession in 2010. It lets the sales tax on other taxable goods drop just a bit to 6.25 percent.
That idea strays slightly from plans being debated at the highest levels of Republican leadership.
Senate Republicans advanced a plan that would drop the state’s sales tax from 6.3 percent to 6.25 percent while dropping income tax rates and phasing out almost all tax deductions.
Rep. Richard Carlson, R-St. Marys, said he plans to discuss the proposal with other House Republican leaders and return to the negotiating table Wednesday.
The mostly symbolic reduction to the sales tax rate follows months of debate over whether to extend the rate at 6.3 percent instead of letting it drop as scheduled to 5.7 percent in July. And it’s relatively far off from the 6 percent sales tax proposal House Republicans offered a week ago.
“It’s less than it was,” Sen. Les Donovan, R-Wichita, said.
The Senate Republicans’ offer would phase all out tax deductions, except for charitable donations, by 2018, starting with a 25 percent reduction next year. Meanwhile, the top income tax rate that workers pay on the money they earn beyond $30,000 would drop to 4.8 percent and continue falling to 3.5 percent by 2018. The lower-income rate would decline from 2.9 percent to 2.5 percent over the same time.
The proposal reverses course on the increase of standard deductions approved as part of last year’s massive income tax cuts.
It would set the standard deduction at $5,000 for heads of household and $6,500 for married couples who file jointly.
Projections show the plan would leave the state with some money in its savings account for several years before that account drops to just $41 million – or 0.6 percent of expenditures – by 2018.
Brownback said he met with legislative leaders Tuesday morning, but he declined to discuss details of those conversations.
“Everybody has to compromise a little bit to get there,” he said.
Sen. Tom Holland, D-Baldwin City, who ran against Brownback for governor in 2010, said that like other lawmakers, he has largely been kept out of private discussions among top Republican leaders in which the tax proposals evolved.
He said he thinks the House should just approve the Senate’s budget and go home without extending the sales tax or other tax policy to help fill in the budget problems the state will face if it doesn’t bring in new revenue.
“Let the people decide what they’d like tax policy to do,” he said. “This negotiating of tax policy behind closed doors, this is doing the Koch brothers’ bidding. This isn’t doing the people’s bidding.”