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Archive for Wednesday, May 2, 2012

New estimate shows $712 million deficit from tax cuts

May 2, 2012

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— The tax cut endorsed by Gov. Sam Brownback would drive the state into a $712 million deficit within six years, according to a new state calculation released Wednesday.

But the Brownback administration said that the calculation put together by the Kansas Legislative Research Department was wrong. Kansas Secretary of Revenue Nick Jordan and Brownback's budget director Steve Anderson said the tax cut will boost the economy and lead to a positive ending balance in state coffers.

"We are not playing games with these numbers," said Jordan. "We are confident in our methodology," he said. He said the Revenue Department would release its estimates on Thursday.

Legislators have depended on the non-partisan, professional staff of the Kansas Legislative Research Department for decades.

On Monday, the Legislative Research Department released a state general revenue fund profile that showed the proposed tax cuts would produce a deficit of $161 million in six years. But on Wednesday, it issued a new calculation because the earlier one had an error.

Some legislators said the $712 million deficit under the new calculation would make it difficult to approve such a huge tax cut.

"We can't do something that we can't afford," said Senate President Steve Morris, R-Hugoton.

Senate Democratic Leader Anthony Hensley of Topeka said, "We do not want to self-impose a budget crisis that will put us in the red year after year."

The deficit could not be covered by budget cuts, said Hensley because during the recession the state already cut $1 billion.

The proposed bill would decrease state income tax rates and exempt non-wage business income, which will affect nearly 200,000 businesses formed as limited liability corporations, chapter S corporations and sole proprietorships. It would also follow current law and allow the 6.3 percent state sales tax to decrease to 5.7 percent next year, and provide $180 million over four years to local governments for property tax relief.

After the $712 million deficit figure was released, Jordan and Anderson had a quick briefing with reporters. They said the Revenue Department calculated the impact of the tax cuts on an incremental basis year by year, while the Legislative Research Department figured the cumulative effect of the tax cut.

Jordan and Anderson said their methodology was supported by an independent certified public accountant.

Earlier Wednesday, Kansas Democratic Party Chairwoman Joan Wagnon, who is also a former secretary of the Kansas Department of Revenue, said the tax cut would rob funds from schools and other services while delivering a windfall to wealthy businesses including Kansas-based Koch Industries.

"Certainly the public would not believe this tax break should be targeted to one of the largest and wealthiest businesses in our state," Wagnon said in a statement delivered to the House-Senate tax conference committee that is working on the bill.

Wagnon, who served as revenue secretary under former Gov. Kathleen Sebelius, a Democrat, said there are 38,000 limited liability corporations that would be affected. She said she did a search of the Kansas secretary of state's databases and found 24 business entities related to Koch Industries that are LLCs and would be affected by the proposal. All of the companies are based in Wichita.

"Of course, I have no way of knowing the tax impact of this change on their business. But, their filing status is public, and definitely included in this bill as it stands now," she said.

Jordan defended the business tax cut, saying it would help thousands of small businesses hire more people. "Is that evil? The goal is to grow small businesses," he said.

Wagnon also criticized other parts of the tax-cutting package that would eliminate tax credits for child day care and a provision that would require low-income families who now quality for both the Earned Income Tax Credit and food sales tax rebate to pick one and not benefit from both.

"Again, limiting lower income earners to either the EITC or the food sales tax rebate seems to take from those less able to pay in order to fund a tax break for the LLC's (Koch included!)," she said.

Comments

Gotland 1 year, 11 months ago

Could also Read: “Government spending $712 million more than it can afford.”

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jd1929 1 year, 11 months ago

Will Sam just get on with his 2016 presidential bid and leave Kansas alone?! He's already done enough damage in the last 2 years to impress the GOP primary voters out there.

The timing here works out well for him. When the deficits start to hit in 2014 he'll be out of Kansas and on the campaign trail.

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Armstrong 1 year, 11 months ago

" Let me see, how can I get people whipped up into a frezy today ? " Since I don't really do news - ahh republican..... From the mind of Rothschild

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pace 1 year, 11 months ago

Is mental incompetence grounds for impeachment of a Kansas governor?

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Cait McKnelly 1 year, 11 months ago

I'm on Social Security and it's my only income. It's supposed to be non-taxable. Despite that, I was just informed that I have a "tax liability". Figure that out.

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ljwhirled 1 year, 11 months ago

Just leave the flipping taxes where they are.

Holy Christ, if it ain't broke, don't fix it.

How about we spend the surplus on services for the handicapped, disabled and destitute?

Or use it to lower tuition.

Or use it to provide better pre-school education.

F&*@#g idiots.

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dabbindan 1 year, 11 months ago

how about this sam? keep taxes unchanged till we get a $712 million surplus, make your tax cuts, pay for any deficits out of the surplus till it's gone. if it doesn't go, you were right. tax cuts stay. if it goes, we're no further behind and taxes immediately go back to where they were.

simple, no risk.

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mikekt 1 year, 11 months ago

That's our Governor, George W. Brownback & the tax scam fantasy of the week! If he gets his tax program passed, soon, the State of Kansas will be as broke as the Federal Government is (thanks to Bush Jr.-king of tax scams) and on it's way into an even deeper financial hole of our own for Kansans.

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Dan Eyler 1 year, 11 months ago

We cut spending and regulation and decreased unemployment by 1 percent and in one year we have 600 million in the bank. Clearly the answer is to decrease taxes increase jobs and watch the cash flow in. If there are jobs everybody participates. If there are jobs and the message is work first we need less handouts. But everybody from top to bottom should have no free ride.

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JackMcKee 1 year, 11 months ago

I doubt they're taking into consideration the abuse of this loophole on "business income". It won't be difficult to turn just about every dollar of profit in the state into nontaxable income. A more reasonable estimate is probably 3 times what they came up with. I think that might be the idea anyway.

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Paul R Getto 1 year, 11 months ago

Oh ye of little faith. The gov knows what he's doing.

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bobberboy 1 year, 11 months ago

RECALL BROWNCRACKED NOW !!!!!!!!!!!!

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bobberboy 1 year, 11 months ago

Browncrack and his buddies the Koch Brothers are going to run this State into Bankruptcy !!!!!

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tbaker 1 year, 11 months ago

Another example of Mr. Rothschild’s abysmal journalistic standard.

Add the caveat: "if current spending levels continue" the tax cuts would start eating that surplus and produce a deficit....

I would make the observation he is obviously biased, but this example is so amateurish and child-like I'm not sure it's fair to even call it that. What a hack.

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question4u 1 year, 11 months ago

From a $600 million surplus to a $712 million deficit in just six years. A decline of more than $1.3 billion! That's some efficient destruction! Sherman's march through Georgia was nothing compared to what Brownback's roadmap has in store for Kansas.

You've got to hand it to Brownback. Losing $2.4 million in matching funds by eliminating the Kansas Arts Commission and returning a $31.5 million Health Exchange grant were clearly just warm-up acts. When his Kansas-wrecking juggernaut goes into action the world will gasp in shock and awe.

There's no doubt that businesses will be lining up to get into Kansas. Business owners love the idea of relocating to states that are about to jump off of a cliff financially. That way they can invest in facilities that they will end up abandoning in six years when the state has no alternative but to reinstate taxation with a vengeance.

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yourworstnightmare 1 year, 11 months ago

Should be easy enough to find $712 million in budget cuts...

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