In State of State, Brownback outlines plan to cut Kansas personal income tax
Gov. Sam Brownback on Wednesday called for a cut in the state personal income tax and minimal budget increases, saying that will put Kansas in the fast lane on the road to economic growth.
"Let's put our 'lost decade' … in the rear view mirror and speed ahead — at 75 miles per hour — to make this decade the decade of growth and job creation," Brownback, a Republican, said in the State of the State address.
But his plan hit immediate bumps from legislators.
Brownback's proposal would cancel a scheduled decrease in the state sales tax rate, and eliminate many state tax credits and deductions, such as the deduction for charitable contributions and mortgage interest payments, and the earned income tax credit, which helps low-income families.
Senate President Steve Morris, R-Hugoton, said Brownback's tax plan and others that have been proposed for the 2012 legislative session need to be closely reviewed.
"Taxes are very important," Morris said. "We have to be very careful," he added. Morris said he wants to see the recommendations of a special tax committee he formed before reaching any conclusions.
Brownback's tax plan
On the state personal income tax, Brownback's plan would collapse the three current individual income tax rates into two.
Kansas' current tax rates for married couples filing jointly are 3.5 percent on the first $30,000 of income, 6.25 percent on income between $30,000 and $60,000, and 6.45 percent on the portion above $60,000.
Brownback's plan would tax 3 percent of the first $30,000 and 4.9 percent on the portion above that. It would also eliminate individual state income tax on most small businesses. This will affect 191,000 Kansas tax filers.
He said the proposal would provide a $425 tax cut on the median Kansas tax return of a married couple with one child filing jointly and income of $65,430.
But his plan would also make permanent the 6.3 cents per dollar state sales tax, which was scheduled to fall to 5.7 cents per dollar on July 1, 2013. That was a temporary tax increase approved in 2010 to help the state budget weather the Great Recession.
Democrats and some Republicans said they were concerned that Brownback's proposed income tax cut would shift the tax burden to property taxes. "If property taxes rise, that hurts everyone," said state Rep. Tom Sloan, R-Lawrence.
Brownback's tax proposal was the latest addition to the governor's sweeping agenda in his second year in office.
In his State of the State speech, he reviewed his other plans. They include replacing the public pension plan for new hires with a 401 (k) style savings plan; hiring private companies to manage Medicaid; pushing more responsibility for funding schools onto local taxpayers; and repeal of what he called the "use-it-or-lose-it" water law.
Brownback also pushed for a 2 percent cap on spending increases and devoting state revenues raised above that amount to more tax cuts. "This will get us even closer to the pro-growth states with no state income taxes, which are among the country's strongest performers," he said.
But Morris said holding the state budget to a 2 percent increase would be difficult to achieve. Mandated spending for pensions and social service caseloads alone would top 2 percent, he said, and that is before working on budgets for education, public safety and other areas.
Brownback said his budget plan for the next fiscal year would produce an ending balance of $465 million, but some legislators said such a large ending balance is unnecessary when there are many unmet needs in the state.
State Rep. Barbara Ballard, D-Lawrence, said cuts to schools and social services over the past several need to be addressed now before they hurt the state's future. "There is a price to pay for that," Ballard said.
Democrats, who are vastly outnumbered in the Legislature, on Wednesday offered an alternative agenda.
"Kansas Democrats cannot support a tax cut that makes the gap between the rich and the middle class even wider," said House Minority Leader Paul Davis of Lawrence. "We are particularly unwilling to support such a proposal while schools are limping along and other, more regressive taxes are driving Kansans into poverty," Davis said.
Democrats said they want to focus on creating jobs, funding schools and lowering property taxes.
The Democrats' economic proposal includes a group of bills aimed at improving job-training programs, and repairing aging buildings at state universities and city and county infrastructure. The measure calls for expanded gambling, including a casino in southeast Kansas and slot machines at racetracks.
On education, the Democrats have called for spending a portion of current and projected future surpluses to start restoring cuts to public schools.
"We believe that the school funding cuts in recent years have gone way too far," Davis said.
A portion of the greater-than-expected revenue flowing into state coffers — now standing at approximately $350 million — can also be used provide property tax relief, Democrats said.
The full text of the Democratic response may be read here.
By Scott Rothschild