Details of Brownback’s tax plan revealed

TOPEKA — Republican Gov. Sam Brownback’s chief lieutenants on Thursday defended his sweeping plan to overhaul the state’s income tax code, saying they believe it would benefit all segments of society and dismissing criticism that it would unfairly reward the wealthy and businesses at the expense of the poor and working class.

Brownback wants to reduce the state income tax rate for some individuals and businesses to stimulate economic growth, a plan that the second-year governor hopes leads to elimination of the tax altogether.

Lt. Gov. Jeff Colyer told a joint meeting of the House and Senate tax committees that the changes would result in simpler system that treats taxpayers more fairly by reducing the rates for all taxpayers and ending credits and exemptions that benefit the few.

“This is a great opportunity for the state of Kansas and it’s really how we move this state forward,” Colyer said.

But Senate Minority Leader Anthony Hensley said the changes do nothing to address what he sees as the unfairness in the tax code where a person earning $30,000 pays the same rate as someone earning $30 million.

“I still think there is an inequity,” said Hensley, a Topeka Democrat and member of the tax committee.

The plan would end 23 tax credits, as well as exemptions and itemized deductions, including the earned income tax credit for low-income residents. The changes would begin in calendar year 2013 and be reflected in taxes filed in April 2014.

“The Kansas tax code is overly complicated,” Colyer said. “It picks too many winners and too many losers.”

Shannon Cotsoradis, president and CEO of the nonprofit Kansas Action for Children, said the plan has the potential for thousands of children to slip into poverty should the tax package become law.

“The repeal of the earned income tax credit clearly flies in the face of the goal of reducing childhood poverty,” she said. “I think we have a tough road ahead.”

Cotsoradis said eliminating tax credits for adoption, dependent care and investment in the state’s college savings program would suffer in pursuit of “short-term” economic gains.

“The governor talked a lot about job growth and putting Kansas on the path to a more prosperous future. That’s not just about investing in tax reduction. You have to make a similar investment in the human capital in our state,” she said.

The administration contends that under its plan, money previously spent on the credits will instead be spent on other social safety net programs, including Medicaid and temporary assistance benefits.

Revenue Secretary Nick Jordan, a Republican former state senator, said an analysis of the plan suggests it could create as much as $1.8 billion in new disposable income over six years. The analysis was conducted by the agency and economist Arthur Laffer, who advised a study committee that developed the proposal and headed by Jordan.

“We think it’s solid,” Jordan said. “We think everyone will benefit from the lower personal income rate.”

A married couple filing jointly with one child, using the standard deductions and earning $50,000 would see their taxes decrease about $223, the administration said, using one example.

Brownback’s plan wouldn’t use any of the state’s anticipated $378 million in reserves to pay for the tax cuts. Instead, it would offset the loss of revenue by eliminating tax credits, including $81 million for the earned income tax credit and $51.7 million for the rebate for sales tax on food.

“It’s a credit for the working poor” that helps pay bills, Hensley said.

Hensley said figures he had from the Department of Revenue project, absent tax growth, the changes to the tax code would lead to a $90 million reduction in state revenue in fiscal year 2013. That gap grows to $99 million in 2014 and declines incrementally through 2018 to $47 million through growth in new taxes on oil and gas development and keeping the state sales tax rate at 6.3 percent.

The rate is scheduled to decrease to 5.7 percent on July 1, 2013, keeping a promise made by legislators that it was only a temporary fix to cover a budget shortfall. Brownback’s plan uses that higher rate and subsequent growth in collections to pay for the income cuts.

“Who’s going to vote for that? We promised the people of Kansas that was a temporary increase,” Hensley said. “I’m not going to renege on that promise. I voted for it.”

A revenue spokeswoman confirmed the 2013 figure but couldn’t validate Hensley’s figures for future years. Jordan has said growth generated by the overall tax changes would result in more disposable income being spent and generating sales taxes.

Democrats have their own tax relief plan, reviving a city-county revenue sharing program to send $45 million to local governments for property tax relief.

Anti-tax organizations have given Brownback’s proposal passing marks.

Ashley McMillan, president, Kansans for No Income Tax, said the plan would promote small-business in every county by eliminating their tax burden.

“His plan immediately gives every working Kansan a pay raise,” she said.

The Kansas Chamber of Commerce, whose political action committee is targeting Senate President Steve Morris, a Hugoton Republican, and other senators who have supported tax increases in the past, said the reforms signal that Kansas is “open for business.”

“Kansas simply cannot shed private sector jobs as it has over the last decade. Kansas had fewer private sector jobs in 2011 than it did in 2001. This is a direct result of a failed ‘tax and spend’ model propagated by previous administrations,” said the group’s president, Kent Beisner.