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Bids to eliminate state income tax falter in Kansas, Missouri

The push to eliminate state income taxes in favor of higher sales taxes in Missouri and Kansas may soon be over for the year, officials in both states said Tuesday.

Last week a judge threw out Missouri’s analysis of a petition aimed at putting an income-for-sales tax swap on the November ballot, a potentially fatal blow for that effort. And in Kansas, lawmakers say the tax reform package they’ll consider next week almost certainly will fall far short of the no-income-tax goal.

Ending the income tax turned out to be “a big elephant to swallow,” said Travis Brown, a political consultant who has worked with anti-income tax forces in both states.

Last year those forces were optimistic that Kansas and Missouri would top the list of states pursuing such a trade, in which taxpayers would see their income taxes eliminated but sales taxes increased and broadened to bring in revenue.

Financing campaigns against the income tax wasn’t an issue. St. Louis multimillionaire Rex Sinquefield agreed to bankroll Kansans for No Income Tax, and gave more than $2.5 million to Let Voters Decide, the Missouri group pursuing a petition for a statewide no-income tax vote.

But no-income tax plans have struggled for traction in both states, both in legislative chambers and the courts.

On Friday, Cole County Judge Patricia Joyce ordered state officials to rewrite the Let Voters Decide petition in Missouri, in part because she said it did not accurately state the potential cost. A summary attached to the petition said the measure would cost the state $1.5 billion a year at most, but Joyce found the loss would be closer to $7.5 billion.

If her decision isn’t overturned on appeal — or if roughly 100,000 signatures on a redrafted petition aren’t submitted by the May 6 deadline — a referendum on the swap won’t take place this year.

Opponents of the income-for-sales trade are elated.

“Missourians recognize a bad idea when they see it, and so did the court,” Scott Charton, a spokesman for Missourians for Fair Taxation, said in an emailed comment. “The silly dawg just wouldn’t hunt.”

Brown said the judge had erred, but he acknowledged the exact terms of the swap can be complicated. Voters, he said, still like the concept of a state without an income tax.

“The race to zero is alive and well, but everybody (now) has a greater understanding of how difficult the challenge might be,” he said.

Missouri legislators could conceivably rescue the ballot language, but even Republicans appear reluctant to push a massive tax overhaul with a month to go in this year’s session.

“When you start talking about a complicated issue like switching your tax code there’s a lot of discussion that could go on,” said Sen. Will Kraus, a Lee’s Summit Republican. “It would take an enormous amount of time, and we’ve got other issues we need to be addressing.”

Across state line, Kansas lawmakers will take up a tax reform package at next week’s wrap-up session. But if a plan passes — still not a certainty — it’s highly unlikely it will eliminate the Kansas income tax. In fact, it may end up preserving many of the tax breaks and exclusions that some legislators wanted to end.

Conservatives are disappointed at the lack of progress on the plan, a failure some blame on GOP Gov. Sam Brownback.

“Lack of leadership from the top,” said state Rep. Charlotte O’Hara, a Johnson County Republican. “The governor just doesn’t have the willingness to really get out in front and push this.”

Brownback could not be reached for comment. Other Kansas lawmakers have said his administration has pushed hard for tax reform, which has met a mixed reaction from the heavily Republican legislature.

Brownback’s budget for this year proposed flattening the state’s income tax by eliminating several popular deductions, but he did not suggest eliminating the levy.

Ashley McMillan, president of Kansans for No Income Tax, said her group was encouraged by progress on tax reform, even if it ends up falling short of its original goals.

“We’re not a group that thinks it has to be all or nothing right away,” she said. “We understand that a process like this definitely takes time.”

Other legislators have said such a major change in the state’s tax structure was always a challenge at a time when Kansas is grappling with school finance, pension reform, redistricting, and significant changes in health care for the poor.

Jonathan Williams, tax policy director for the American Legislative Exchange Council, said Kansans and Missourians should not be surprised at the apparent failure to immediately enact no-income tax legislation.

“The idea of eliminating the income tax can be a very long-term process,” he said. “We’re talking about a very revolutionary topic, a bold ideaIt does face serious resistance from those who benefit from the current system.”

Williams discussed the issue from Oklahoma, where state lawmakers are also considering reducing or eliminating the income tax over a 10-year period.