TOPEKA, Kan. — Gov. Sam Brownback's administration worked Wednesday to contain the potential political damage from the release of internal figures showing that his sweeping plan to overhaul individual income taxes would increase the collective tax burden for the state's poorest households.
Revenue Secretary Nick Jordan told a state Senate committee that any increase in the total burden for taxpayers with adjusted gross incomes of $25,000 or less would be wiped out by a larger commitment to social services in Brownback's budget proposals. Also, Jordan said the group of taxpayers in question — 41 percent of all individual income tax filers — includes affluent and middle-class teenagers with part-time jobs.
Brownback's plan cuts individual income tax rates and exempts 191,000 operators of partnerships, sole proprietorships and other small businesses from any income taxes on their business earnings. To offset the potential loss of revenue to the state, the plan would eliminate tax credits and deductions and keep the state's sales tax at 6.3 percent instead of dropping it to 5.7 percent in July 2013 as scheduled.
According to the Department of Revenue's own figures, the only class of taxpayers that would see an increase in its aggregate income tax burden would be the one with people whose incomes are $25,000 or less, while the largest percentage cut would go to the group with incomes exceeding $250,000. As a group, the lowest-income taxpayers actually get a net payment from the state, so the tax change they face is calculated as an increase of more than 5,100 percent.
But Jordan told the budget-writing Senate Ways and Means Committee that plans to boost spending on temporary cash assistance and state health insurance coverage to needy families ultimately will provide more help to struggling Kansans than the one-time annual check many of them receive through a tax credit designed for poor, working families.
"It's inaccurate to say that this is hurting low-income people," Jordan said after the committee's meeting.
Some legislators already were wary of Brownback's plan because lawmakers promised the 6.3 percent rate would be temporary when they raised the sales tax in 2010 to help balance the budget. But the release of figures Tuesday about the average effects of Brownback's plan on broad groups of taxpayers led critics to call it "Robin Hood in reverse."
Brownback's fellow conservatives, who control the House, still appeared to back his general approach of trying to cut the state's top income tax rates and make the tax code simpler as a way to stimulate economic growth. But Democrats stepped up their criticism, and moderate Republicans who control the Senate distanced themselves from the governor's plan.
"It's a significant problem in the eyes of many legislators because it appears to be increasing taxes for the poor and decreasing taxes for the rich," said Sen. John Vratil, a moderate Leawood Republican.
Brownback's administration contends such a description of the governor's plan is unfair. The Department of Revenue previously has released examples of how the plan would affect hypothetical taxpayers, and it shows varied results, including for those with incomes of less than $25,000.
The department's latest figures show those 564,000 taxpayers together receive a net income tax refund of almost $2 million. Because of the tax credit for poor workers and their families, thousands of them pay no net income taxes and receive money back from the state.
According to the department, that group's tax burden would grow by $88 million, or an average of $156 for each taxpayer. Senate Assessment and Taxation Committee Chairman Les Donovan, a Wichita Republican who said Brownback's plan is a good starting point for tax policy, said the latest numbers will "get people to start calling on the phone, crying and wringing their hands."
And Sen. Ty Masterson, a conservative Andover Republican who's developing his own tax plan, said: "I wholeheartedly agree with where the governor's plan is taking us. I'd have made a few different tactical decisions to get it done."
Supporters of the tax credit for poor workers contend it encourages employment and allows their families to keep more of their income.
But the administration views it essentially as a social program costing the state about $90 million a year, and one that's not as effectively or efficiently administered as other programs. And, Jordan said, the administration plans to dedicate another $113 million to social services if its tax plan passes.
"Don't use your tax policy for what a lot of people term social engineering," Jordan said. "If it's worthy to be funded, fund it in a program."
The sales tax is an issue as Brownback pushes his plan partly because he and fellow conservative Republicans criticized legislators for increasing the levy in 2010, when Brownback was running for governor. Brownback once called the move "unwise" and said the state needed to live within its means.
Some conservatives previously talked about repealing the sales tax increase, and Ways and Means Committee Chairwoman Carolyn McGinn, a Sedgwick Republican, has proposed dropping the rate to 5.7 percent six months early, in January 2013.
"There seems to be a lot of legislators who are interested in keeping the promise about the sales tax," she said after the committee's meeting.
But Jordan said the administration — and many economists — believe cutting income taxes is more effective for stimulating economic growth.
Kansas Department of Revenue: http://www.ksrevenue.org
Kansas Legislature: http://www.kslegislature.org