Acknowledging that the state is facing a “hard dip” in revenues, Kansas Gov. Sam Brownback said Tuesday that the Legislature should consider ways to pay for massive income tax cuts that he signed into law earlier this year.
While Brownback alluded in an Overland Park forum to a couple of methods of paying for the tax cuts — what he called “pay fors” — he stopped short of urging any specific way.
Brownback noted that he originally proposed paying for the income tax cuts by keeping part of a penny sales tax that’s supposed to expire next July 1 as well as eliminating many tax deductions and credits, including deductions for interest on home mortgages and for charitable contributions.
However, those proposals never got out of the Legislature. Brownback said Tuesday that lawmakers should take another look, especially with the state now facing a drop of $705 million in revenue brought on by the tax cuts.
“I think we ought to do some of the pay fors that I proposed last year,” Brownback told several hundred people attending the forum, sponsored by the Lathrop Gage law firm. “I think the Legislature ought to do those.”Short of making the entire penny sales tax permanent or eliminating popular deductions and credits, Brownback vowed to support funding for education, public safety and medical services for the poor.
“Those are the protected categories,” the governor said. “I am going to do everything I can to protect those three categories.”
The governor knew when he signed the tax cuts into law that they were expected to leave gaping holes in the state budget, at least in the short term and maybe longer.
Legislative fiscal analysts predicted the tax cuts would cost the state about $3.7 billion in revenue over five years.
Brownback and other advocates of the tax plan are banking that a short-term dip will eventually be replaced with revenues created by economic growth spurred by the tax cuts.
When Brownback first proposed the income tax plan in January, he did propose a number of ways to cover lost revenue, but he ran into trouble when lawmakers received a cool reception from constituents who didn’t want to give up their home mortgage interest deduction.
Within days, conservative lawmakers in the House went to work on their own plan that would lower taxes without eliminating many tax deductions and credits. Eventually, a bitterly divided Legislature passed a bill that lowered taxes but didn’t eliminate the popular deductions for home mortgage interest and charitable contributions.
State Rep. Marvin Kleeb, an Overland Park Republican who sat on the House tax committee, said Tuesday he expects the Legislature to look at a range of measures for filling the hole, including the possibility of keeping the full penny sales tax. Six-tenths of the penny is supposed to expire on July 1.
“It would appear that businesses have not been hurt by this sales tax,” said Kleeb, who also attended the forum. In an interview after the forum, Brownback wouldn’t say what he might propose to cover budget deficits caused by the tax cuts because the proposed budget for 2014 hasn’t been completed.
“What I am not going to do — and what I won’t sign — is putting taxes back on small businesses and raising the income tax rate back up,” Brownback said. “Certainty is a key issue on tax policy.”
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