Amid tax impasse, Kansas lawmakers edge forward on budget

Changing tactics in an attempt to break gridlock over a budget deficit, Kansas House and Senate negotiators inched forward on a budget bill even as they waited for consensus on how to pay for it.

The spending bill still falls about $390 million short of closing the state’s $400 million budget gap. Making it balance would require the Legislature to pass a global tax increase plan, the toughest and most elusive of political compromises.

Ordinarily, the Legislature would pass its tax bill first and then finish the session by passing the budget.

But Republicans dominating the Legislature remain deeply split over how — or even whether — to raise taxes to offset a shortfall largely created by tax cuts in 2012. The Senate moved slightly forward Tuesday on a placeholder plan that could serve as a vehicle for a final tax plan.

Moving the budget could pressure lawmakers on the taxes needed to fund it. Passing a budget also would allow the state to avoid furloughing workers on Sunday.

Republican Gov. Sam Brownback unveiled his latest tax hike plan last week. Legislators have been considering, and rejecting, alterations of it ever since. Among the proposals floated in the Capitol are suggestions to eliminate most state income tax deductions and create a short-term amnesty program this fall to get delinquent taxpayers to pay up — producing a one-time spike in revenue.

Republicans remained at odds over how much to increase the state’s 6.15 percent sales tax and how much to backtrack on tax breaks championed by Brownback for business owners and farmers.

“You just have, really, a couple of variables, where people are still, ‘Well, I just don’t know about this one or that one,’” Brownback said in unveiling his plan.

The state’s budget problems arose after legislators heeded Brownback’s call in 2012 and 2013 to slash personal income taxes as an economic stimulus. The state cut income tax rates and exempted the profits of 281,000 business owners and 53,000 farmers.

Senate President Susan Wagle, a Wichita Republican, said the amnesty program and eliminating deductions are finding favor because “they’re not rate increases.”

Under the 2012 and 2013 changes, the state already planned to limit most deductions by 2017 to half of what filers claim on the federal tax forms.

According to the state Department of Revenue, itemized deductions are claimed only by 20 percent to 22 percent of the state’s 1.3 million individual income tax filers.

This year’s proposal would eliminate all but three state income tax deductions, effective at the start of this year, including ones for unreimbursed job expenses, tax preparation fees and high medical expenses. The measure would raise $97 million during the next fiscal year.

Taxpayers still could deduct the full amount of their charitable contributions, half the property taxes paid on their homes and half the interest paid on their home mortgages.

“In the scheme of what’s going on here, we felt like it was reasonable,” said Luke Bell, a lobbyist for the Kansas Association of Realtors, which fought in the past to prevent the elimination of the property tax and mortgage interest deductions.

This story was originally published June 2, 2015 at 8:42 PM with the headline "Amid tax impasse, Kansas lawmakers edge forward on budget."