TOPEKA — An offer from the Kansas Association of Realtors to compromise on tax issues received serious consideration Wednesday from the Legislature’s tax committee chairmen, even as the group’s members rallied at the Statehouse to save two popular income tax deductions for homeowners.
At least 200 real estate agents participated in the rally and then fanned out to meet with legislators individually. The association’s lobbying at the Statehouse came after it disclosed spending $195,000 on radio, newspaper and Internet advertising last month to build public pressure on lawmakers.
Republican Gov. Sam Brownback is targeting the two income tax breaks as part of a broader plan to position Kansas to eventually eliminate personal income taxes. One is for the property taxes Kansans pay on their homes, and the other is for the interest on their home mortgages.
The revenues raised by scrapping the deductions would help stabilize the budget so the state could phase in additional reductions in individual income tax rates over the next four years as a follow-up to massive income tax cuts enacted last year to stimulate the economy.
The realtor group argues that scrapping the deductions will hurt middle-class families the most — an idea Brownback’s administration strongly disputes. Some real estate agents also worry that once the deductions are gone, the state won’t follow through on promises to phase out personal income taxes.
But Association of Realtors lobbyist Luke Bell said the group would support phasing out the two deductions if the state also phases out other deductions and income tax credits as tax rates drop over time. He said such a policy is fair — unlike targeting only two deductions.
“We want to come to some mutually agreeable solution,” Bell said after the rally. “We’re not here to scuttle the process.”
The Senate Assessment and Taxation Committee endorsed a bill containing most of Brownback’s plan earlier this week, retaining his proposal to scrap the mortgage-interest deduction as well as another measure to cancel a decrease in the state sales tax scheduled for July. The committee rejected Brownback’s proposal to eliminate the property tax deduction.
The Senate plans to debate the measure next week.
Senators also had scheduled debate for Wednesday on a separate House-passed measure to fix technical flaws in last year’s law cutting taxes. But leaders of the chamber’s Republican supermajority postponed consideration of that bill because they worried that it would inspire a premature debate on Brownback’s proposals as GOP senators were trying to sort out their views.
Les Donovan, a conservative Wichita Republican who serves as chairman of the Senate Assessment and Taxation Committee, said he cannot predict what proposals will be viable, but said the compromise suggested by Bell’s group could be considered if the state still can balance its budget for the next few years.
“That might be one of the options,” Donovan said.
The House Taxation Committee has yet to debate the governor’s proposals. Chairman Richard Carlson, a St. Marys Republican, said it will actively consider alternatives, and he was receptive to the realtor group’s compromise.
“We’ll give it consideration,” Carlson said. “It’s serious, and I think it’s fair to the people who take a mortgage interest deduction now.”
About 315,000 of the state’s 1.4 million individual income tax filers claim the mortgage interest deduction, according to the Department of Revenue. About 372,000 claim the deduction for property taxes on their homes.
“Why are we trying to bag on property owners and middle-class families?” said Steve McCullough, president of both the Association of Realtors and a Newton real estate company.
Brownback’s administration contends homeowners will see a net benefit from the next round of income tax rate reductions, even if the two deductions disappear. Brownback said Wednesday that home sales also will grow if the state’s economy is more robust.
“We’ve got a good plan to grow the economy,” he said.
Bell said that last month, the realtor group broadcast spots on 35 radio stations for two weeks, sponsored Internet ads for several weeks and published ads in the state’s 13 largest newspapers. The association’s spending was documented in a report it filed earlier this month with the secretary of state’s office.
The campaign was financed partly with a $100,000 grant from the National Association of Realtors, Bell said. Kansas real estate agents pay dues to the national group as well as their state association.