Posts tagged with Taxes
GOP tax plans would increase taxes on low-wage Kansans, decrease taxes for high-income Kansans, report says
Topeka — Taxes will increase for low-wage Kansans and decrease for those with higher incomes under plans being considered by Republican state legislators, according to a Washington, D.C.-based think tank.
The Institute on Taxation and Economic Policy looked at the various proposals before the Legislature that essentially increase the state sales tax while ratcheting down the income tax and reducing deductions.
Currently, the state sales tax of 6.3 percent is scheduled to decrease to 5.7 percent on July 1. But Gov. Sam Brownback wants to keep the rate at 6.3 percent, saying that will stabilize the state budget and help buy down income tax rates.
A Senate GOP plan to keep the rate at 6.25 percent, while lowering income tax rates, would result in a tax increase for 60 percent of Kansans, making $60,000 per year or less, the ITEP analysis shows. Of that group, the largest percentage increase would be for those making $20,000 per year or less.
But those making more than $60,000 per year would realize a tax cut under the proposals. ITEP is a nonprofit, nonpartisan group. Its stated mission is to provide information on tax policies, tax fairness, government budgets and sound economic policy.
Topeka — Senate Republicans on Wednesday proposed a 6.25 percent state sales tax rate and a 5.7 percent rate on food.
House Republican leaders said they would come back later this afternoon to tell the Senate what they thought of the plan.
The current state sales tax is 6.3 percent, but is scheduled to fall to 5.7 percent on July 1.
Republicans say they need to keep the sales tax higher to shore up state coffers — depleted by last year's income tax cuts — and to buy down more income tax reductions over the next six years. Democrats say the income tax cuts benefit the wealthy and will reduce revenue needed for essential state services.
Under the latest Senate proposal, itemized deductions would be eliminated over six years, except for charitable contributions. The standard deduction would also be cut to $5,000 from $9,000 for head of household, and to $6,500 from $9,000 for married filing jointly.
By 2018, income tax rates would be cut to 3.5 percent from 4.9 percent on the top rate, and to 2.5 percent from 3 percent on the bottom rate.
Agreement on tax changes is essential to getting movement on a state budget. Legislators are in the 89th day of the session. Earlier, GOP leaders said they wanted to finish the session in 80 days.
Topeka — As the Kansas Legislature remained deadlocked over taxes and spending, Gov. Sam Brownback is speaking today at a $40-a-ticket luncheon in Chicago before the Illinois Policy Institute.
The event has been titled "There's no place like home. A conversation with Kansas Governor Sam Brownback."
The information about the event says that Brownback "has proven to be an innovative reformer seeking to expand liberty in the Sunflower State." It says Brownback enacted the largest income tax cut in Kansas history and is seeking more cuts.
The Illinois Policy Institute describes itself as a non-partisan organization dedicated to supporting free market principles and liberty-based public policy initiatives. Here is a link to information about the event.link text
Topeka — The legislative wrap-up session entered its second week and the major items have yet to be wrapped up.
Gov. Sam Brownback, Senate President Susan Wagle, R-Wichita, and House Speaker Ray Merrick, R-Stilwell, planned to meet Monday to discuss taxes, but for rest of the Legislature there's not much to do.
A lot of resolutions have been passed honoring folks, and on Friday state Rep. Phil Hermanson, R-Wichita, proposed to his girlfriend, Rhonda Riggs, on the House floor. She said yes.
But the major state business — passing a budget and the taxes to support it — have eluded legislators. Still, Brownback was optimistic.
In a two-minute exchange with reporters, he said, "It always takes a lot to finish a session up and that's where we are now."
He said talks with Wagle and Merrick have gone well. "We have excellent leadership, seasoned leadership," he said.
Brownback declined to talk about what was being discussed behind closed doors. And he wouldn't give a time period on when he expected the Legislature to finish.
Monday was the 80th day of the session, and leaders of the GOP-dominated Legislature didn't expect an agreement on tax cuts and a state budget until later in the week.
Brownback and Senate Republicans have agreed to cancel a sales tax decrease from 6.3 percent to 5.7 percent scheduled by law July 1. Brownback says revenue from the higher sales tax rate is needed to stabilize the budget and help enact income tax cuts.
House Republicans want to let the sales tax drop and enact less aggressive income tax reductions.
As far as the budget goes, Brownback has called for the same level of funding for higher education as last year, while the House has proposed a 4 percent cut, and the Senate, a 2 percent cut.
Topeka — Gov. Sam Brownback continues to try to build his case for making the 6.3 percent state sales tax permanent, instead of letting it fall to 5.7 percent.
On Friday, Brownback said the state may need revenue from the higher levy in case of a ruling against the state from the Kansas Supreme Court on funding of public schools.link text
"We've got a lawsuit pending against the state right now that we have lost at the lower court on K-12 funding, and we don't know when the Supreme Court is going to rule — it's under mediation now — but I think you have got to also be also looking at that in the overall picture," Brownback said.
In 2010, facing a revenue crisis, the Legislature approved a temporary, three-year increase in the state sales tax to 6.3 percent from 5.3 percent, and then decreasing it to 5.7 percent on July 1.
Brownback wants to keep the rate at 6.3 percent, saying the revenue is needed to balance the budget. He has said in recent days that the higher sales tax is required to prevent cuts proposed by the House and Senate to higher education.
Democrats oppose extending the higher rate because they say current budget problems are the result of Brownback signing into law last year income tax cuts, which they say benefit mostly the wealthy. link text In addition, they said that Brownback wants to use future sales tax revenue to cut income taxes even more. Conservative Republicans in the House have also voiced opposition to the higher sales tax rate, saying the budget should be cut more.
But on Friday, Brownback added the issue of school funding to the mix.
In January, a three-judge panel ruled that legislators must increase spending on schools by at least $440 million. The issue is pending before the state Supreme Court.
Brownback said legislators have to consider the impact that a possible final ruling against the state would have on the budget and how the state would come up with additional revenue for schools.
"You could get yourself where you'd be in a crisis position, and I don't think that's prudent," Brownback said.
The tax changes approved last year with only Republican support and signed into law by Gov. Sam Brownback are being called the worst tax measures passed by a state in the last two years.
That's according to an article in Governing magazine link textthat quotes right- and left-leaning financial experts.
Exempting from taxes pass-through income for business owners provides "an incentive to game the tax system without doing anything productive for the economy," said Joseph Henchman with the Tax Foundation.
Nick Johnson with the Center on Budget and Policy Priorities said the tax package "fails both vertical and horizontal equity tests." And he said the size of the cut was so "jaw-dropping" it will prevent the state from making investments in education and infrastructure.
The effort by Gov. Sam Brownback and several other Republican governors to eliminate personal state income taxes is based on an economic theory that is "extremely flawed," a new report by a non-partisan research group says.
Brownback has depended on the claims of supply-side economist Arthur Laffer that states without personal income taxes are outperforming those with state income taxes. Last year, Brownback hired Laffer for $75,000 to help draw up the governor's tax proposal.
But the Institute on Taxation and Economic Policy says income tax cuts don't appear to actually stoke state economies.
"In reality, states that levy personal income taxes, including the states with the highest top rates, have seen more economic growth per capita and less decline in their median income level over the last 10 years than the nine states that do not tax income," the ITEP report states. "Unemployment rates have been nearly identical across states with and without income taxes."
Laffer's claims are based on growth in Gross State Product, which is related to population trends, and he asserts that tax policy is behind the migration of people into low-tax states.
But ITEP says population growth in states isn't determined by tax policy. The report says the growth is more attributable to low housing prices, warm weather and high birth rates in those states.
The ITEP study looks at median family income, which shows that while income has declined in most states over the past decade, the declines have been smaller in states with income taxes. Five of the nine states without income taxes are doing worse than average in median income growth.
And ITEP says that Laffer's theory fails to take into account that some states don't choose to levy an income tax because they have an unusual economic resource, such as oil, coal or tourism.
Topeka — Realtors from across the state gathered Wednesday just outside Gov. Sam Brownback's office in the Statehouse to rally in opposition to a proposal by the governor to eliminate the homeowner mortgage interest and property tax deductions.
Brownback has said removing the deductions are needed to balance the budget and ratchet down the state personal income tax in future years.
Realtors say elimination of the deductions will hurt hundreds of thousands of Kansans and send the housing market into a tailspin.
Topeka — As legislators gather today for the start of the 2013 session, one of the main budget issues is whether to make permanent the 6.3 percent state sales tax, which under current law is set to fall to 5.7 percent on July 1.
Gov. Sam Brownback, a Republican, has talked about the possibility of extending the 6.3 percent levy as the state grapples with budget shortfalls caused by income tax cuts he signed into law.
But if he wants to do that, he may not get any help from Democrats.
In the depths of the "Great Recession," a coalition of Democrats and moderate Republicans in 2010 approved increasing the state sales tax from 5.3 percent to 6.3 percent to avoid deeper budget cuts .
Under the law, the increased rate holds for three years and then falls to 5.7 percent, with four-tenths of one cent going toward paying for transportation projects. Many of those moderate Republicans and Democrats who voted for the temporary sales tax increase were defeated at the polls.
Since Republicans hold significant majorities in the Legislature — 92-33 in the House and 32-8 in the Senate — it is possible to make the temporary sales tax permanent without Democratic votes. But that would require the votes of some Republicans who have pledged to oppose tax increases.
"There isn't any amount of political spin that the governor or those legislators who adamantly opposed the sales tax increase can put on this. If they want to extend the tax increase, it is a tax increase pure and simple," said Senate Minority Leader Anthony Hensley, D-Topeka.
Asked if Democrats might face the dilemma of cutting programs they support or voting to extend the tax, Hensley said, "Sam Brownback wants to extend the sales tax to pay for his income tax cut. Let there be no misunderstanding about this at all."
Even last year, Brownback had proposed that the state keep the 6.3 percent rate to offset income tax cuts.
He has argued that cutting income taxes does more to stimulate the economy than lowering the sales tax.
Keeping the sales tax at 6.3 percent would raise approximately $250 million for the fiscal year that starts July 1. The gap between current state spending and projected revenue for the next fiscal year is already weighing in at $700 million.
Topeka — The Kansas chapter of Americans for Prosperity wants members of the 2013 Legislature to sign a pledge that they will vote against tax increases.
So far, 25 have signed the anti-tax pledge. Here is a link to those who have: http://bit.ly/ZDIy73
But would a legislator be breaking that pledge if he or she supported extension of the 6.3 percent state sales tax rate? Under current law, that rate is set to decrease to 5.7 percent on July 1, 2013.
The answer to that question is yes, but there is a caveat. According to Jennifer Rezac, a spokeswoman for AFP-Kansas, if extending the 6.3 percent state sales tax rate "were included in legislation that has an overall net reduction in taxes, then it wouldn't be violating the pledge."
The Kansas Chamber of Commerce, which vehemently opposed the temporary sales tax increase when it was passed in 2010, now supports maintaining the rate if it means further reductions in state income taxes.
Both the Kansas Chamber and AFP have worked hard, and succeeded in many instances, in helping defeat legislators who voted for that temporary state sales tax increase, which was approved to avoid deeper cuts to schools, social services and public safety.