Brownback seeking end of property tax deduction for homeowners

? Kansas Gov. Sam Brownback wants to eliminate two popular state income tax deductions for homeowners, and even some of his conservative Republican allies in the Legislature said Wednesday they were surprised to learn he’s targeting both.

Legislators in both parties said they weren’t previously aware that Brownback seeks to end an income tax deduction claimed by Kansans for the property taxes they pay on their homes. He also proposes ending the deduction for the interest paid on home mortgages. Each tax break is claimed by more than 300,000 taxpayers.

The two proposals are part of Brownback’s broader plan to keep the state budget stable after aggressive income tax cuts last year while allowing Kansas to reduce individual income tax rates further. He wants to keep the state’s sales tax at its current rate, rather than allowing it to drop in July as scheduled by law, but his plan also includes a second round of reductions in income tax rates and provisions for automatic income tax cuts in future years.

Legislators saw more details Wednesday, when the Senate Assessment and Taxation Committee agreed to sponsor a bill containing Brownback’s plan and Budget Director Steve Anderson briefed the budget-writing Senate Ways and Means Committee. The governor’s proposal to eliminate the mortgage interest deduction received widespread attention last week, but there’s been little notice given by legislators to his plan to eliminate the property tax deduction.

“That was news to me,” Senate Ways and Means Committee Chairman Ty Masterson, an Andover Republican, said, echoing comments from other prominent conservative GOP lawmakers.

Brownback’s office noted the proposal to eliminate the deduction for property taxes in documents it released last week after the governor’s annual State of the State address, but he didn’t discuss most of the details of his tax plan in his speech. Anderson told reporters that the measure came from the Department of Revenue and “was put in without me.”

Asked about that comment, Department of Revenue spokeswoman Jeannine Koranda said: “It’s the governor’s tax plan.”

Kansas’ aggressive income tax cuts last year have drawn notice from Republican legislators and governors in other states, including Louisiana, Missouri, Nebraska and Oklahoma. Kansas reduced individual income tax rates, boosted standard deductions and exempted the owners of 191,000 partnerships, sole proprietorships and other businesses from income taxes as well.

But the reductions also left Kansas with a projected $267 million budget shortfall for the fiscal year beginning in July. Brownback outlined his proposals last week to eliminate the two popular income tax deductions for homeowners and keep the sales tax at 6.3 percent. Lawmakers and Brownback’s Democratic predecessor as governor boosted the sales tax in 2010 to close a previous budget shortfall but promised it would drop back to 5.7 percent after three years.

Anderson said the governor is trying to phase out individual income taxes while preserving core government programs and retaining healthy cash reserves. Brownback proposes to decrease rates again over the next three years. Also under his plan, rates would automatically drop further when state revenues grow more than 4 percent in a year and the state has healthy reserves.

The budget director called it “a glide path to zero.”

But Masterson said it will be difficult for Brownback’s administration to sell eliminating the property tax deduction, just as he and other lawmakers see resistance to eliminating the mortgage interest tax break.

Koranda said about 372,000 of the state’s 1.4 million taxpayers use the property tax deduction, with an average tax savings of $125 expected for this year. About 315,000 claim the mortgage interest deduction, with an average tax savings of $300.

The administration projects that eliminating the two deductions will raise an additional $231 million during the fiscal year beginning in July. Keeping the sales tax at its current rate would generate $262 million.

Brownback’s administration argues that ongoing decreases in income tax rates and last year’s increase in standard deductions for married couples and single heads of households will make the two deductions for homeowners less important.

But Rep. Tom Sawyer of Wichita, the ranking Democrat on the House Taxation Committee, predicted the proposals will hit middle class families hard. He wasn’t aware of the measure to eliminate the property tax deduction until a reporter asked him about it Wednesday.

“No one’s talked about that,” he said. “Wow.”