Topeka A tax-cut proposal endorsed by Gov. Sam Brownback remained in conference committee Monday as fiscal forecasts showed the measure would lead to state deficits.
The most up-to-date projection provided by Kansas Legislative Research Department showed deficits starting in 2015 and growing to $161 million by July 1, 2017.
An earlier projection showed the tax cuts would transform a $612 million surplus in the next fiscal year into a $911 million deficit in a little more than five years. But that, officials said, was based on an earlier version of the bill and lower revenue growth projections.
Despite the reduction in the projected deficit, opponents of the proposal said it would still produce huge problems for the state.
“We need to slow this process down,” said Sen. Tom Holland of Baldwin City, who is the lead Democrat in the Senate on tax issues.
Republicans on the House-Senate tax conference committee had agreed to the bill last week, but on Monday indicated more work needed to be done. The committee is scheduled to meet again today.
Democrats and some Republicans have endorsed a plan to follow current law and allow the state sales tax to decrease from 6.3 percent to 5.7 percent next year. They also have supported a plan aimed at providing $180 million in property tax relief over four years.
But Brownback, a Republican, and his supporters want to cut taxes more. Brownback has voiced approval of a plan to decrease income tax rates and phase out the non-wage income tax on nearly 200,000 businesses.
Brownback says the plan will boost the economy. Democrats say it will leave no revenue to adequately fund core services of state government.
According to the most recent projection provided by the Kansas Legislative Research Department, the tax cuts would start producing state budget deficits three years out.
But Sen. Les Donovan, R-Wichita, who is chair of the Senate tax committee, said the proposal, especially the exemption of non-wage business income proposed by Brownback, would jump start the state’s fiscal picture.
“What if the governor’s idea really does work,” Donovan said. “These numbers will be blown away,” he said.
On Friday, Brownback said he believed there would be enough revenue for the state budget. “The numbers look doable,” Brownback said. He said that he and the Legislature must “continue to be aggressive in holding our costs down.”
But Holland said there is no evidence to indicate the tax cuts will increase jobs and business activity.
Under the proposal, the three state income tax rates of 3.5 percent, 6.25 percent and 6.45 percent would be collapsed into two rates of 3 percent and 4.9 percent. The business tax elimination would be phased in over four years.
On Monday, both Donovan and House tax chair Richard Carlson, R-St. Marys, proposed ideas that would lengthen the phaseout of the business tax or temporarily set the top personal income tax rate at 5.1 percent as ways to reduce the projected budget deficits.
Democrats and some Republicans also have criticized the plan because it would eliminate or reduce several tax credits aimed at helping low-income Kansans. The measure would remove renters from the homestead property tax refund; repeal tax credits for child care and dependent care; and taxpayers who qualify for both the Earned Income Tax Credit and food sales tax rebate credit could only receive one of those credits.