Topeka Kansas House members gave first-round approval Tuesday to a sweeping income tax bill, tacking on an amendment that also would end the sales tax charged on groceries.
The 68-53 vote capped five hours of debate and marked the second time in two years the Republican-controlled House has approved a measure cutting income tax rates.
The measure would lower the tax rates in all income brackets and require any growth in state revenue above 3 percent be used to cut taxes further. It also keeps in place popular income credits and exemptions, including the earned income tax credit for low-income tax filers.
It would also phase out earnings taxes for thousands of partnerships, sole proprietorships and other small businesses. The sales tax rate would drop to 5.7 percent from 6.3 percent in July 2013, as previously scheduled.
The elimination of sales taxes on food would cost the state an estimated $350 million annually.
Proponents say the changes would give all Kansans more disposable income and create jobs. Critics said the effects would leave Kansas government with fewer resources to function.
House Speaker Mike O’Neal, a Hutchinson Republican, said the chamber made incremental progress in moving the tax debate forward, despite any amendments he might not support.
“The bill I like is the bill that gets agreed to in conference committee, because that means that we’ve got the Senate onboard with tax reform, we’re onboard with it and we’ve got something on the governor’s desk,” O’Neal said.
Senators have been considering their own tax proposals, but nothing has emerged from committee.
Republican Gov. Sam Brownback proposed a similar income tax bill that House members reviewed and sampled in drafting their own package. The measure also borrowed from a plan they approved late in the 2011 session.
House Taxation Committee Chairman Richard Carlson said the measure was a step toward reversing what he described as 30 years of failed tax policy in Kansas. The St. Marys Republican said it gives out of work Kansans hope, “not unemployment checks.”
“There is a beginning process for economic growth. It’s not an event, it is a process. We need to start it today,” Carlson said.
Brownback spokeswoman Sherriene Jones-Sontag said the administration’s policies to create jobs were taking hold, evidenced by a report earlier Tuesday that said Kansas added 22,000 jobs in the past year.
“The governor’s tax bill as originally proposed is the best plan to grow our economy and create jobs,” she said. “Now is the time to hit the accelerator on the Kansas economy.”
Critics called the policy misguided.
“It would be nice if we could look the people of Kansas and in the face and tell them we could get rid of their income tax without having any consequences, but the fact of the matter is, this is going to disable funding for schools, universities, public safety and a lot of things Kansans depend upon from state government,” said House Minority Leader Paul Davis, a Lawrence Democrat.
Rep. Nile Dillmore, a Wichita Democrat and ranking minority member on the tax committee, said the cost of the bill isn’t completely understood because of the provisions that could allow businesses to reorganize for tax purposes and shelter their income.
“Conservative thinking usually means I don’t take high risks. This is a very high risk,” Dillmore said.
The House defeated several amendments that sought to limit state spending for its 10-year transportation program. Those changes would have ended a 0.4 percent sales tax dedicated to repaying highway bonds, an effort by conservative Republicans to further rein in state spending.
Another change would have put in statute the goal of eliminating the income tax by 2020.
Rep. Scott Schwab said he wasn’t convinced that the state’s tax and economic policies of the past decades of “picking winners and losers” were working.
“We’ve got great highways, but we’re losing high-paying jobs. We’ve got great schools, but we’re losing high-paying jobs,” the Olathe Republican said.