Archive for Tuesday, May 29, 2012

Shawnee lawmakers support tax-cut measure

May 29, 2012

Elements of the bill

House Bill 2117, which Gov. Brownback signed into law May 22, will:

• Do away with the three state income tax rates of 3.5 percent, 6.25 percent and 6.45 percent. They will be replaced with two rates: 3 percent and 4.9 percent

• Eliminate nonwage income taxes for 191,000 small businesses

• Increase the standard deductions for head-of-household filers from $4,500 to $9,000 and for married taxpayers filing jointly from $6,000 to $9,000

• Reduce the state sales tax rate from 6.3 percent to 5.7 percent

State Rep. John Rubin, a Shawnee Republican, likened the battle over massive tax-cut legislation signed into law by Gov. Sam Brownback May 22 to “a high stakes game of poker.”

“The Senate didn’t want any tax cut,” said Rubin, who represents the 18th District. “So they passed a bill that blew a huge hole in the budget, figuring the House wouldn’t pass it and the governor wouldn’t sign it. We called their bluff.”

The question now is whether the state will win the economic-development jackpot some conservative Republicans are predicting or be forced into draconian cuts in education and other state funding.

Rubin and two other Republican House members from Shawnee, 23rd District Rep. Brett Hildabrand and 39th District Rep. Owen Donahoe, voted for the tax-cut legislation, the Senate version of House Bill 2117. And all three disputed the dire predictions its passage has spawned.

In addition, 10th District Sen. Mary Pilcher-Cook, R-Shawnee, voted for the bill — and not because she figured it wouldn’t become law.

House Bill 2117 “will spur economic growth, which in turn will build the revenue to fund education and services for our most vulnerable citizens,” Pilcher-Cook said. “We are finally putting the horse before the cart. Governor Brownback is to be commended for ending the downward spiral where tax increases and irresponsible spending were taking our state.”

The Legislature’s research staff has forecast that the tax cuts, totaling about $3.7 billion over five years, will lead to a budget shortfall by July 2014 that could grow to a range of $2.5 billion to $3 billion by July 2018.

But according to members of the Shawnee delegation, those figures are based on “static” projections, which don’t take into account positive economic changes the cuts are expected to generate. Brownback’s office said “dynamic projections” show the new law will result in 22,900 new jobs, increase population by 35,740 people and generate $2 billion in disposable income in the next five years.

That’s not enough, according to an analysis by the Kansas Economic Progress Council. It claims that Kansas, which currently has a workforce of only 1.1 million, would have to add about 500,000 new jobs each paying $50,000 to fill the projected $2.5 billion-plus gap.

“This is a tax bill that only a deficit-spending politician who has spent his career in Washington, D.C., could love,” said Rochelle Chronister, a former House assistant majority leader and chair of the Kansas Republican Party. “What does it do for Kansas? It bankrupts the state within two years.”

Hildabrand said the projections of future debt are based on the false assumption that Kansas can approve budgets with deficits as the federal government does.

“Now there may have to be some budget cuts,” Hildabrand said, but added that he doesn’t expect them to be as deep as some project.

Nine states have totally done away with their income taxes, Hildabrand said, “and they’ve ushered in an era of growth.” One of those states was Tennessee, which earlier this month lured away 372 production jobs at Jostens, a longtime Topeka employer, he said.

Donohoe said he was part of a conservative group pushing a plan this session that would have eliminated state income taxes on the first $30,000 of income. Like Brownback’s original tax-cut proposal, it would have paid for much of the lost revenue by eliminating tax deductions, credits and exemptions.

Rubin said about five tax plans were floated during the session, including a more moderate House plan that took an incremental approach to the income tax reductions.

“But the Senate, which is more liberal and less fiscally responsible in my opinion, didn’t want any income tax reform,” he said.

Therefore, he said, the Senate passed a bill with the cuts Brownback asked for but without the offsetting revenue producers.

In addition to calling for elimination of deductions, exemptions and credits, Brownback had called for retaining a 1 percent state sales tax increase due to sunset on Jan. 1. The Senate’s version of House Bill 2117 will cut the tax from 6.3 percent to 5.7 percent next year.

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