TOPEKA, Kan. — Republican leaders in the Kansas House outlined their own proposal Friday for overhauling the state's income tax system but insisted they weren't discounting a plan GOP Gov. Sam Brownback unveiled 10 days ago.
Speaker Mike O'Neal said he and other top House Republicans believe their plan is in keeping with Brownback's goals to lower income tax rates and help small businesses. The governor said he is flexible about the details of tax legislation and will work with lawmakers on a package.
Like Brownback's plan, the House GOP package would exempt 191,000 operators of partnerships, sole proprietorships and other small firms from having to pay income taxes on their business earnings. Also, like the governor, House Republicans want to eliminate a tax credit for poor workers and their families, promising the state will boost spending on social services instead.
But the House Republicans' plan would keep credits and deductions, including ones for charitable contributions and interest payments on home mortgages, which Brownback's plan would scrap. Also, the House plan promises cuts in individual income tax rates in the future and only if state revenues grow, while the governor's proposal would reduce rates for 2013.
And House GOP leaders are proposing to drop the state's sales tax rate to 5.7 percent in July 2013, as scheduled under Kansas law. Brownback had proposed keeping the rate at 6.3 percent to offset the revenue losses caused by his income tax changes.
"I think it's good to have options on the table," O'Neal said during a Statehouse news conference. "We shouldn't lose sight of the fact that I think all roads are leading in the same direction."
Questions immediately arose about the House GOP plan because it ditched parts of Brownback's package that raised new revenues to offset cuts elsewhere. House Republican leaders said their plan wouldn't cause budget problems and would still allow the state to build healthy cash reserves but acknowledged they won't have projections until next week.
Brownback first outlined his tax proposals during his State of the State address on Jan. 11, stressing that he wanted to make income taxes more simple and fair while stimulating economic growth.
But six days later, state Department of Revenue figures showed the plan would increase the collective income tax burden for the state's poorest households, as filers with adjusted gross incomes of $25,000 or less would be the only group to see an increase. Because that group now gets a small net payment from the state, the increase — totaling $88 million — was calculated at more than 5,100 percent.
The numbers strongly undercut Brownback's plan, despite promises from his administration that boosting spending on social services would more than offset any additional tax burden for poor families. His push to eliminate credits and deductions also spurred opposition, particularly from some real estate agents who were worried about the potential loss of the mortgage interest break.
"I do not believe the governor's plan can pass the Senate," said Sen. Dick Kelsey, a conservative Republican from Goddard. "Almost everybody has a different issue that there's primary heartburn issue and when you put it all together, there's no way that many of us can vote for it."
Brownback's proposal on the sales tax caused bipartisan grumbling. Legislators increased the tax in 2010 to help balanced the budget, promising that the 6.3 percent rate would be temporary, and some don't want to go back on that promise.
"The thing that I think really is sinking the governor's plan is the continuation of the sales tax increase," said Senate Minority Leader Anthony Hensley, a Topeka Democrat. "Then, we're reneging, basically, on the promise that we made to the people."
Even if Brownback has lost any chance of passing his full tax plan, some legislators said major parts of it could become law. House Republican leaders expect their plan to incorporate a proposal from the governor to cap the annual growth in spending, financing it with state tax dollars at 2 percent to create room for future cuts in income tax rates.
Also, many Republican legislators have embraced Brownback's argument that cutting income tax rates will spur economic growth.
Arthur Laffer, a conservative economist and former adviser to President Ronald Reagan, received a friendly reception from GOP lawmakers during a Statehouse visit sponsored by the administration, which had a $75,000 consulting contract with him.
Sen. Ty Masterson, R-Andover, said alternative plans represent an attempt to incorporate "tactical tweaks" to Brownback's plan while advancing its principles.
And Brownback told reporters during a news conference: "If they want to do things differently, great. Let's begin it and put it forward in the legislative process."
Kansas Legislature: http://www.kslegislature.org
Kansas governor: https://governor.ks.gov/