Gov. Sam Brownback is trying to sell the tax plan he has outlined this year as only one part of a multi-year effort to position Kansas to phase out personal income taxes, but he faces a backlash from legislators viewing tax issues with a shorter-term perspective.
By JOHN HANNA
The Associated Press
Brownback continues to receive praise in national conservative circles for his commitment to phasing out individual income taxes to spur long-term economic growth. Kansas enacted massive individual income tax cuts last year, and fellow Republican governors are at least talking about following suit.
But to keep Kansas from becoming a cautionary tale, Brownback and the state's GOP-dominated Legislature must stabilize the state budget, too. Even as Brownback promises future reductions in individual income tax rates, he's pushing to eliminate two popular income tax deductions for homeowners and to cancel a decrease in the sales tax scheduled for July.
Democrats and some Republicans have attacked this year's tax plan from Brownback as a big net tax increase over the next three years. The Department of Revenue responded last week with new projections showing the revenue-raising measures still don't offset last year's tax cuts. The governor's allies contend lawmakers must view both together and remember the long-term goal – though they acknowledge doing so is difficult in a Statehouse focused on annual budgets and biennial elections.
“You really get lost in all the details,” said Senate Majority Leader Terry Bruce, a conservative Hutchinson Republican and Brownback ally. “You're obsessed to a certain extent with just the next vote a lot of times.”
The Senate plans to debate tax legislation this week, and most of Brownback's plan cleared its Assessment and Taxation Committee. Bruce is confident that Republicans, who hold a 32-8 majority, will rally around the governor's proposals, but Democrats plan to offer their own plan, and some GOP alternatives are possible.
Brownback wants to phase in a second round of cuts in individual income tax rates over the next four years. His plan also would trigger further rate reductions in the future if economic growth is robust, though there's no specific date for the end of the personal income tax.
To stabilize the budget, Brownback is proposing to eliminate income tax deductions that Kansans receive for the property taxes on their homes and the interest on their home mortgages. Also, he'd keep the sales tax at its current rate of 6.3 percent, rather than letting it drop to 5.7 percent in July, as promised by budget-balancing legislation three years ago.
The Senate committee's version preserves the deduction for property taxes but scraps the mortgage interest and sales tax breaks. The bill would net the state $918 million in new revenues over the next three years, before taxpayers saw most of the benefit from cutting individual income tax rates further.
Revenue Secretary Nick Jordan contends it's unfair to think of this year's proposals in isolation. His department projects that last year's reductions will save taxpayers almost $2.7 billion during the same three years, more than offsetting any revenue-raising measures proposed this year.
And Brownback made the same revenue-raising proposals last year in pushing to reduce income tax rates and exempt the owners of 191,000 partnerships, sole proprietorships and other businesses from income taxes altogether. A balky Legislature passed the big cuts but jettisoned unpopular “pay-fors” the governor had sought to create a “glide path” without budget problems. Brownback signed the result, arguing that overly aggressive tax cuts were better for the economy than the status quo.
“If we would have had the pay-fors that were proposed last year passed, we would be in a totally different situation,” Jordan said last week.
Yet some legislators view last year's cuts as history and focus on what Brownback's latest plan does going forward. Democrats who argued that last year's cuts were reckless now portray the Republican governor as a tax-increaser.
At least a few conservative Republicans wonder why Kansas would miss the opportunity presented by last year's tax cuts to downsize state government. They're also wary of approving revenue-raising measures this year with only a promise that personal income taxes eventually could be phased out thanks to the governor's plan.
“I want to talk about what it does today,” said Sen. Dennis Pyle, a conservative Hiawatha Republican.
Yet Brownback retains the backing of national conservative figures.
Grover Norquist, president of the influential anti-tax group Americans for Tax Reform, said it's easy to understand the skepticism facing Brownback this year. Norquist said in the past, proposals to eliminate tax breaks have been designed to support new spending and increase the size of government.
“This is just a different question than they've ever seen before,” Norquist said.
The fate of the tax plan Brownback is offering this year may rest on GOP legislators coming to the same conclusion.
Political Writer John Hanna has covered Kansas government and politics since 1987. Follow him on Twitter at www.twitter.com/apjdhanna