In the latest twist on tax talks, Senate Republicans pitched a compromise plan Tuesday to drop the state’s temporarily elevated sales tax from 6.3 percent to 6.25 percent while dropping income tax rates and phasing out almost all tax deductions.
St. Marys Republican Rep. Richard Carlson said he plans to discuss the proposal with other House Republican leaders and return to the negotiating table later Tuesday to debate it further.
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.
“It’s less than it was,” Wichita Republican Sen. Les Donovan said.
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The Senate has long pushed for and voted to extend the sales tax rate to bring in more revenue to channel toward income tax reductions.
The Senate Republican 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 2.8 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 head of households and $6,500 for married couples that 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 .6 percent of expenditures — by 2018.
The Senate’s proposal is the latest attempt to fix the big budget problems caused by the hastily approved income tax cuts Gov. Sam Brownback signed into law last year.
Baldwin City Democratic Sen. Tom Holland said the proposal doesn’t appear to present a major change, although he noted that the phasing out of deductions could hit some taxpayers.
“Folks that itemize would be hurting more under this plan,” he said.