Advertisement

Archive for Sunday, May 6, 2012

Tax cut solution will have lasting effect in Kansas

Lawmakers also must decide on redistricting as session winds down

May 6, 2012

Advertisement

What’s more important for Kansas today and in the future: strong schools, a solid social safety net or tax cuts?

That will be the debate this week as legislators approach the final days of the 2012 session.

The decision legislators make will affect Kansas for years to come.

Republican Gov. Sam Brownback is pushing the Republican-controlled Legislature hard for tax cuts, saying the cuts will turbo-blast the state economy.

Critics say the large tax cuts Brownback wants will deplete state coffers making it impossible for the state to adequately fund schools and social services, which have sustained cuts over the past few years during the recession.

The tax cuts, they say, also will shift the burden of paying for these functions to local governments resulting in an increase in property taxes.

The political backstory of the debate couldn’t be more intense as legislators also fight over redistricting.

Kansas is the last state in the nation to redraw political boundaries to adjust for population shifts over the past decade.

Those district lines will help determine who wins elections for the next decade.

Adjourning the House on Friday for the weekend, House Speaker Mike O’Neal, R-Hutchinson, told legislators to rest up because this week “could be a dandy.”

Taxing question

Brownback has been pushing since the start of session in January to cut state income and business taxes.

A proposal that has been approved by a House-Senate tax conference committee would reduce the top individual personal income tax rate from 6.45 percent to 5.5 percent for 2013 and then decline in increments to 4.9 percent for 2017, and it would drop the bottom tax rate from 3.5 percent to 3 percent. It would also put into place a tax break for businesses that Brownback said would be a shot of adrenaline to the heart of the economy.

“I think this is overall a good conference committee bill. I think this gets us on a growth curve from the modeling, from experience,” Brownback said. The cuts aren’t as aggressive as he initially proposed, Brownback said, dropping the adrenaline comparison. “The heart’s going to be pumping harder. Better, I should say, not harder.”

But others have said the business tax cut proposal is unwarranted, unprecedented and will have an unknown effect on state revenue. The measure would phase out state taxes on certain types of income for partnerships, sole proprietorships, limited liability companies, and corporations formed under Subchapter S.

“The new tax break would benefit large corporations and investment vehicles more than the small-business job creators the governor and legislative advocates claim they are trying to help,” a report by the Center on Budget and Policy Priorities said.

The Brownback administration maintains that the tax break will give businesses more money to invest and hire.

But Senate Vice President John Vratil, R-Leawood, said the idea that tax cuts will spur the economy is discredited supply-side economics.

“I am getting more emails saying do not cut my income tax if it is going to result in reductions in schools, public safety and highways,” Vratil said.

Opponents of the tax cut plan also are wary of estimates by the Brownback administration that its overhaul of the state’s Medicaid system will produce savings. If that assumption is wrong, the combined effect of traditional growth in Medicaid and the tax cuts will drive the state into huge deficits.

Moderates vs. conservatives

The conference committee tax plan will likely be voted on this week.

Essentially, the only obstacle to enacting the Brownback-endorsed tax plan are Democrats and moderate Republicans in the Senate. That group favors a plan with a smaller price tag that is aimed at controlling property taxes, restoring cuts to public schools and carrying through on current law to drop the state sales tax rate of 6.3 percent to 5.7 percent.

The moderate Republican leadership in the Senate is in the crosshairs of the conservative wing of the Republican Party, which is led by Brownback.

Conservative Republicans hold a solid majority in the House, but they are at a slight disadvantage in the Senate, and that is how the tax issue bleeds into redistricting.

Brownback’s allies want new Senate district boundaries drawn in a way that benefits conservative Republicans so that the Senate will be controlled by conservatives in 2013.

Asked point-blank if he was trying to oust moderate Republicans in the Senate through the redistricting process, Brownback gave a one-word answer: “No.”

But during debates in the Senate on redistricting, Brownback’s top staff have flooded the zone on the Senate floor. Republicans and Democrats have said Brownback has cast a long shadow on redistricting. In addition, the Kansas Chamber of Commerce political action committee is working to oust the moderates.

A nuclear option in the House

And if pressure from Brownback, the Kansas Chamber of Commerce, and the House weren’t enough, there is even more leverage against the moderates.

In March, the Senate killed a $3.7 billion, five-year tax cut, but then moderates reversed course after arm-twisting from Brownback’s office and sent the measure to the House-Senate conference committee to continue work on tax plans.

Now, if the Senate this week rejects the tax-cutting plan that has been approved by the conference committee, the House could simply concur with that more expensive plan already approved by the Senate and put that on Brownback’s desk for his signature.

Speaking to reporters last week, House Speaker O’Neal said he wasn’t making a threat but mentioned that scenario was a possibility.

“The administration tells us that they can make it work. It’s a lot of tax relief in a hurry, so you’d expect a quicker stimulus from that,” O’Neal said. He said he would prefer that not happen, but added, “It happens. Last week in the session, if that’s the only option left when you want to move forward, the option is used. And this wouldn’t be the first time.”

Comments

ProfessorSeamus 1 year, 11 months ago

This concept is based on the same logic that came up with the idea of "enterprise zones" in the 1980's. If you reduce or eliminate taxes in a region it will unleash small entrepreneurs who will revitalize the area with their new businesses. The problem is, the strategy doesn't work. If you are trying to decide whether to open a business the taxes you pay on your profits are way, way down on your list of concerns. First you have to have business capital, a location, supplies, customers, advertising, insurance, liscenses, etc. There are so many things that you must do before you ever make a profit that cutting the tax on that hopeful profit does not provide much incentive. There was lots of research on enterprise zones in the UK and here, and the virtually unanimous conclusion was they did not work. Which is why you do not hear about them now (and why the Governor is not calling this an enterprise zone, even though it is the same idea). So, if the policy won't stimulate new business we can at least expect it to incentivize current businesses to hire more workers, right? Unfortunately, I think that is also doubtful. Wages a business pays are a business expense, so the business already deducts them on its tax return. Cutting income tax rates doesn't make those wages any less expensive for the employer. As a result cutting tax rates for businesses does not provide any new incentive for the business to hire more workers. It appears the best we can hope for is that this plan increase business owners marginal profits by a couple of percent. Hopefully they will choose to spend most of that, and most of what they spend will be in Kansas, and that will lead to some increase in economic activity. Of course, we could also use the money to hire more teachers, repairs some roads and bridges, and/or provide services for our most vulnerable and it would likely have at least as big of an economic impact. But that is not likely to happen.

0

seriouscat 1 year, 11 months ago

It would take 423,175 new jobs at an average salary of $34,000 a year in 18 months to generate enough sales and income tax revenue to cover the $829 million projected revenue loss if this tax bill passes.

Those who believe that we are going to get the kinds of results that are being touted as the justification for this regressive tax plan...wanna buy a bridge?

0

tange 1 year, 11 months ago

jafs say: "who do I vote for?"

The lesser of evils, unfortunately.

/ tho' regarding "restore america" candidate Ron Paul, probably best not to vote for the lesser of weevils

// restore what?!

0

kansanjayhawk 1 year, 11 months ago

Creating a positive economic atmosphere for Kansas is the priority. Creating a tax structure that does not stifle growth and opportunity. Brownback is trying to make that happen.

0

toe 1 year, 11 months ago

Lower taxes. Less government services. Wonderful.

0

yourworstnightmare 1 year, 11 months ago

Just because a business has more money does not mean it will necessarily create more jobs.

Jobs are a business expense, and businesses exist to make money. A business will only hire if there is a demand for their product that is not being met.

One might argue that taking more money away from consumers in the form of sales and property taxes kills demand for all products, thereby forcing businesses to lay off workers or to not hire new workers.

Cutting taxes on businesses will help their bottom line in the short term, but might actually cause long term damage to their demand base and worsen an already fragile job situation.

0

Cait McKnelly 1 year, 11 months ago

http://www.kansas.com/2012/05/06/2322974/belief-is-not-enough.html This is from the Wichita Eagle. The article should more accurately be called, "Inside the Head of a Religious Rightwing Nut Job. And Why That is Dangerous."

0

Jon Jambor 1 year, 11 months ago

This article starts with a false choice. It's hard to read any more of it.

0

pace 1 year, 11 months ago

As it will take decades to repair the national and global economy from the Bush style economic debacle. It may take generations to repair the damage to the Kansas infrastructure from Brownback's spoon feeding of the billionaires at the cost of cuts to education, infrastructure, and culture. We could of had faith in our country instead of wallowing in fear and using it as an excuse to sell out to Kochmania. While Kansas has some history of foolish government and some corrupt officials, never have I felt, until Brownback that we have a corrupt culture ingrained into the state government.

0

Hoots 1 year, 11 months ago

Idiocracy at it's finest. Why don't the folks out in western Kansas just keep a big hammer in their kitchen. That way every 8 years or so they can hit themselves in the head with it. Why is it Kansans elect good people almost every other cycle? We have had some great Governors and then the next round the west inflicts some completely insane moron like Sam Brownback on us all and make this state a complete embarrassment on the national stage. When that jerk was in Congress Kansas was nothing but flyover country and then people are stupid enough to elect him as Governor. Cats have a better memory than most Kansans. Welcome to Brownbackastan.

0

tomatogrower 1 year, 11 months ago

This is crazy. I thought they believed in the basic supply and demand philosophy. Businesses aren't going to hire because they pay fewer taxes. They are going to hire, because demand for the product or service they produce goes up. It's the middle class and poor people who make up most of the population using these product, yet they will have only a minuscule amount of extra money. There isn't going to be that much of an increased demand. Does Brownback really think that a company who is functioning perfectly well with the amount of employees they presently have is going to hire an extra unneeded worker out of the kindness of their heart, so that worker can get off the public dole? Are they really going to expand their business, because they pay fewer taxes, even though demand for their business hasn't increased? What a laugh. Try joining the real world.

0

FalseHopeNoChange 1 year, 11 months ago

It the government (which btw are people too) don't get "my" money the children will not be educated and crime will soar! Houses will burn to the ground. The tide will rise flooding everyone. Locust will destroy crops. Birds will quit singing. Thy sun may quit rising.

lol

Thanks for the "Schadenfreude" prop boz.

0

just_another_bozo_on_this_bus 1 year, 11 months ago

The tax-cut cult should at least be honest about the only truly predictable result of their tax-cutting would be-- the dismantling and/or nearly complete disabling of government.

That won't make the collapse of public education or the social safety net, or the slow crumbling of public infrastructure any less damaging to a functioning economy and society, but at least voters will get a choice of what sort of future they want for Kansas-- a much wealthier 1% at the expense of the government services that have been developed over many decades, or to maintain the relatively minimal government services that the Schadenfreude brigades want to eliminate.

0

Michael LoBurgio 1 year, 11 months ago

How Much Will Brownback’s Tax Plan Cost You?

Governor Brownback is missing the point. If he wanted to cut taxes for EVERY Kansan he would be pushing for property tax relief.

But he doesn’t want to cut your taxes. His idea of a tax cut will actually cause your tax bill to go up.

And it comes at the expense of the schools that you and families in your community depend on. It puts even more of our most vulnerable at risk. It means state workers won’t see a decent paycheck any time soon.

Contact your legislator today and tell them to support tax relief for ALL Kansans. Tell them to focus on property tax relief, and to forget about Brownback’s income tax cuts that will cost most Kansans more than they pay today.

http://www.workingkansans.com/2012/05/how-much-will-brownbacks-tax-plan-cost-you/

0

Commenting has been disabled for this item.