Amid Tax Impasse, Kansas Lawmakers Agree On 2 Major Items
Republican legislators in Kansas agree on two ideas for raising taxes to balance the state's budget, even as their sharp divisions over other tax issues still hindered them from passing a broader tax plan Tuesday.
Multiple tax plans from GOP lawmakers and one outlined last week by Republican Gov. Sam Brownback include a proposal to eliminate most state income tax deductions. Their plans also would create a short-term amnesty program this fall to get delinquent taxpayers to pay up.
Brownback and the Republican-dominated Legislature must close a projected $406 million shortfall for the fiscal year beginning July 1. The two proposals on which there's broad agreement would raise $127 million.
The consensus on the two issues contrasts strongly with disagreements among Republicans over how much to increase the state's 6.15 percent sales tax and how much to backtrack on a 2012 tax break 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 Senate was considering tax proposals again Tuesday after contentious debates Sunday and Monday showed that its GOP supermajority was fractured. The House has yet to pass a tax plan that would balance the budget, and Tuesday was the 103rd day of the Legislature's annual session, making it one of the longest in state history.
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.
Brownback and other Republicans argue that as income tax rates drop, deductions become less valuable anyway. 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.
Under the proposal, taxpayers still could deduct the full amount of their charitable contributions and 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.
The amnesty program is even less controversial. It would allow the Department of Revenue to waive penalties and interest if back taxes are paid in full from Sept. 1 to Oct. 15.
Some legislators have been skeptical that the program would raise the promised $30 million, but department spokeswoman Jeannine Koranda said the projection is based on past experience.