A simmering standoff between the Kansas House and Senate over taxes cooled Wednesday amid a compromise extending part of a controversial addition to the state’s sales tax.
House negotiators offered to extend three-tenths of a penny sales tax that was approved in 2010 to help the state limp through a recession-driven dip in revenues.
The Senate, meanwhile, was noncommittal Wednesday. It has backed Republican Gov. Sam Brownback’s plan, which trades income tax cuts for renewing the full six-tenths of a penny approved by the Legislature three years ago.
The House proposal was a breakthrough for legislators slogging along this week waiting for action on a tax plan.
“This is a promising turn of events,” said Sen. Les Donovan, a Wichita Republican and chairman of the Senate tax committee.
While House members stressed they were trying to show a good-faith effort to meet the Senate, some stressed they saw no guarantees that any sales tax extension will even pass through their chamber.
“We’re just trying to make an honest effort to get something going,” said Rep. Scott Schwab, an Olathe Republican. “Right now, it’s a roll of the dice and say, ‘Come on seven.’”
Senators seemed cautious about the House proposal, especially since it leaves the state’s rainy-day fund nearly drained empty by 2018.
Senate President Susan Wagle questioned the politics of supporting a plan that renews just part of the sales tax — where lawmakers would still be vulnerable to anti-tax sentiment at the polls.
“Voting for three-tenths is the same as voting for six-tenths, politically,” Wagle said. “So I’m trying to understand their position.”
Republicans from both chambers will meet in an unusual rare session this morning to talk about taxes.
The new plan unveiled by the House lowers income tax rates more aggressively than the plan it originally passed, but not as much as the Senate wants.
The first House plan lowered income taxes with increased state revenues but did not lower income tax rates like the Senate’s plan.
The new House plan includes provisions that would:
• Lower the sales tax to 6 cents from 6.3 cents. The Senate wants to to keep it at 6.3 cents. Without action from the Legislature, the sales tax would automatically drop to 5.7 percent this summer.
• Cut the top tax bracket to 3.8 percent from 4.9 percent by 2017. The Senate wants to go to 3.5 percent by 2017.
• Change the bottom income tax bracket to 2.1 percent from 3 percent by 2017. The Senate wants to take that down to 1.9 percent by 2017.
• Shrink the standard deduction for married couples filing jointly to $6,500 from $9,000. The Senate wants to keep the deduction at $9,000.
The House and Senate proposals both gradually reduce itemized deductions as income tax cuts are phased in through 2018.
However, the Senate wants to protect the deduction for charitable contributions while the House would reduce it over time as income tax cuts are implemented.
The House also is seeking to restore part of the state’s food sales tax rebate program that the Legislature eliminated last year.
The House plan drew a mixed reaction. Some Republicans said they couldn’t support the plan because they campaigned against sales taxes in 2010. Others said it provided a clear way forward.
Still, worries circled around a fiscal analysis of the House plan showing that it — like the Senate’s plan — would generate about $500 million extra for the state.
“I did not come back from six years of retirement to increase anyone’s taxes. I will be voting no,” said Rep. John Edmonds, a Great Bend Republican.
Rep. Arlen Siegfreid, an Olathe Republican, said the new House plan is an improvement over what it passed earlier this year because it includes cuts in income tax rates, something the previous House plan did not.
“This does move us forward,” Siegfreid said.
But state Rep. John Rubin, a Shawnee Republican, said he could not support any plan that does not lower the sales tax to 5.7 cents.
“We made a promise to the voters,” Rubin said.
Yet, Rubin sensed he thought the new plan would have traction in the House.
“If the Senate would agree to the latest House offer with no further changes, I suspect it’s got enough support to pass in the House,” he said.
State Rep. Brett Hildabrand, a conservative Republican from Shawnee, opposed the original sales tax but said he could come halfway.
“I don’t like the idea of extending the entire thing,” Hildabrand said.
The debate over the sales tax was spurred by Brownback’s decision to sign tax cuts into law last year that were not balanced by other revenue increases for when they passed.
Brownback returned to the Legislature this year seeking to extend the sales tax to help fill the hole left by last year’s tax cuts and to pave the way for deeper income tax cuts.
The governor’s decision to keep the sales tax has put him at odds with some of his traditional conservative allies who wanted to let the sales tax lapse.
The Senate has supported Brownback’s plan. But the House has been reluctant to go along with extending the sales tax, leading to a legislative slowdown.
Republican state Rep. Richard Carlson, chairman of the House tax committee, said he had to wait to see if the Senate would agree to the House’s latest tax plan.
“That,” Carlson said, “still remains to be seen.”