Lawmakers on Monday struggled with the costs of a massive plan to reduce Kansas income taxes.
After an initial report showed the plan would cost $900 million by 2018, legislators received another analysis showing the plan would cost far less.
The latest numbers, submitted by legislative analysts, suggest the tax-cutting plan would cost only $160.8 million by 2018.
The reason for the huge difference? Analysts increased their growth projections for state sales taxes. They predicted sales tax growth of 4 percent a year, something that has only happened three times between 1999 and 2009. The earlier numbers were based on 3.75 percent growth.
The huge change in the financial forecast worried some lawmakers. They believe the process should be slowed to make sure the Kansas Legislature has time to carefully review the proposal, which would reduce income taxes for roughly 1.4 million Kansans.
The new estimate “could definitely be too rosy,” said Sen. Tom Holland, a Baldwin City Democrat who serves on the conference committee trying to hammer out a compromise tax plan.
“I think we need to slow the process down and understand what’s behind these numbers,” Holland said. “Let’s do some additional analysis and let’s see what they really mean.”
Heeding the call of Republican Gov. Sam Brownback, lawmakers are working on a plan to reduce income taxes to boost the Kansas economy.
The plan emerging in the Kansas Legislature calls for cutting the number of state income tax brackets from three to two. Joint filers making more than $30,000 a year would pay 4.9 percent. Those earning less would pay 3 percent.
It also would cut taxes for limited liability companies, sole proprietorships and similar types of businesses. Those cuts would be phased in over the next several years.
But the plan would keep deductions for interest on home mortgage and charitable contributions. Also, the proposal would let taxpayers choose between taking a sales tax exemption on food or taking the earned income tax credit.
However, the plan does eliminate a number of tax credits, including those for businesses that provide day care for their employees.
Sen. Les Donovan, a member of the conference committee, called the gap between the two tax cut estimates a “$750 million hickey.”
“I’m very happy with the new numbers because they’re closer to what we thought we were doing,” said Donovan, a Wichita Republican.
Donovan and others cautioned not to read too much into the cost of the tax plan in future years. As proposed, the tax plan leaves the state with money left over from 2013 through 2015. The state doesn’t go into the red until 2016, when the deficit is estimated at $74.6 million.
“Trying to predict what’s going to happen in 2018, I don’t know who could do that and get it correct,” Donovan said. “Nobody.”