In a rare Saturday night session, the Kansas Senate passed a long-awaited tax bill, sending it to a divided House of Representatives that has blocked all previous versions of the plan.
Debate was heated as Senate Democrats accused their Republican colleagues of breaking a promise to bring the state sales tax back down to 5.7 percent and selling out the bottom 60 percent of Kansans in order to benefit the wealthiest residents of the state.
“We’re not robbing Peter to pay Paul, we are robbing Joe and Jane Kansas to pay Charles and David Koch,” said Sen. Tom Holland, D-Lawrence, the lone Democratic senator on the six-member House-Senate conference committee that brought the bill to the floor.
Holland was referring to the billionaire brothers who own Wichita-based Koch Industries and have provided major funding to Republican candidates and low-tax, limited-government groups.
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Senate President Susan Wagle, R-Wichita, defended the tax plan, saying it’s part of an overall effort to shift the tax burden from income taxes to consumption taxes.
“It’s moving to a Fair Tax model, and I think it’s the right thing to do,” she said.
The Senate passage of the bill set up a potential late-night or early morning vote in the House, which had blocked all the tax bills to come before it.
The bill, a heavily amended House Bill 2059, returns some of the tax relief promised by last year’s tax bill and an emergency sales tax increase passed during the height of the recession in 2010.
Overall, it will generate an estimated $777.1 million more through the next five years than current law, according to projections by the Legislative Research Department.
Among the key provisions of the tax plan:
• The sales tax rate will be set at 6.15 percent. That’s less than the current 6.3 percent but more than the 5.7 percent it would automatically revert to on July 1 under the 2010 sales tax bill.
• The top income tax rate for those earning more than $30,000 a year would be reduced to 3.9 percent from 4.9 percent over five years. Rates for the under-$30,000 bracket will drop to 2.3 percent from 3 percent.
• As rates drop, the plan also phases down the value of tax deductions. While charity giving would still be fully deductible, the value of other deductions will be gradually cut to 50 percent by 2018. Gambling losses would no longer be deductible.
• Standard deductions used by lower-income taxpayers who don’t itemize would be set at $5,500 for single-parent families and $7,500 for married couples filing jointly. That’s a smaller deduction than the $9,000 level that was part of the 2012 tax plan.
• The plan would partially restore a food-sales-tax rebate program for the working poor.
• After 2018, growth of government would be capped at 2 percent a year, with any additional revenue being diverted to decreasing the income tax rate.
Legislative Research estimates that the new tax plan would generate deficit spending of $95.8 million to $182 million a year from 2014 to 2018 – deficits that would be covered from state reserves.
In 2018, the state would fall about $24 million into the red, according to the projection.
Led by Gov. Sam Brownback, Republicans are confident that zero taxes on business owners will attract investment and increase jobs and commerce enough to offset state revenue lost to tax cuts.
Coming into Saturday, House and Senate Republicans were at an impasse on tax policy.
But during the House debate on the state budget bill Saturday afternoon, Rep. Richard Carlson, R-St. Marys, went to the podium and announced that negotiators had reached “agreement on a tax plan with all parties.”
By all parties, he meant House and Senate Republican leadership.
Democrats on the tax conference committee were not involved in or even informed of the negotiations that led to the pact, which were done outside the regular committee meeting structure.
Democratic concurrence is not required.
Republicans have more than enough votes to pass a tax plan if they can unite 63 of their 92 members of the House behind the plan.
The bill doesn’t touch the centerpiece of the 2012 tax cut bill, a complete exemption from state income tax for owners of limited liability companies, sole-proprietor businesses, farms and corporations organized under Subchapter S of the federal tax code.
The House Republican caucus has struggled to agree on a tax bill but has been blocked by divisions within the party.
Small-government conservative lawmakers have opposed this year’s tax plans because all those considered so far would raise taxes about $700 million to $800 million over five years, compared to current law.
Other Republican members have opposed the various tax bills for fear that 2014 election opponents will accuse them of breaking the promise the Legislature made in 2010 to revert the sales tax to 5.7 percent this year.
For updates throughout the evening, check out the Wichitopekington blog.