January 16, 2015
Single-parent Mary Lucas found little reason for optimism Friday with the unveiling of Gov. Sam Brownback’s hard-to-swallow remedy for state budget deficits that includes $100 million in ‘sin’ tax increases and a potential freeze on income tax cuts.
Lucas, of Winfield, said the burden of previous tax reform enacted by Brownback and GOP majorities in the House and Senate stripped her of a dependent child care tax credit, a Kansas food sales tax rebate and the homestead property tax refund for renters. At the same time, owners of 190,000 businesses had their state income tax eliminated in addition to capturing steep reductions in individual income tax rates.
“The Brownback experiment enabled my friends with significant six-figure incomes to have their Kansas income tax liability reduced to zero,” she said. “They no longer pay Kansas income tax, while I have seen my Kansas tax income liability increase 50 percent under the Brownback administration.”
On Thursday night, Brownback said in the State of the State speech that he wouldn’t waver in his commitment to drive the state’s income tax to zero.
The budget the governor delivered to legislators Friday indicated he would permit a reduction in the lower-level income tax rate from 2.7 percent to 2.66 percent in January 2016, but subsequent scheduled rate reductions in both brackets would depend on future state revenue.
Brownback recommended the Legislature fill part of a $280 million deficit in the current year and a $436 million deficit in the fiscal year starting July 1 by adopting significant increases in the state’s tax on liquor, cigarettes and tobacco products.
The proposed tax bite: cigarette tax up from 79 cents a pack to $2.29 per pack, liquor tax increase from 8 percent to 12 percent, and tobacco product tax surge from 10 percent to 25 percent of wholesale price.
Jeff Glendening, Kansas director of the conservative Americans for Prosperity, said the organization was “disappointed” by the governor’s proposal to impose higher taxes on alcohol and tobacco. The budget revealed the governor’s claim to be marching the sales tax to zero would actually resemble a crawl, he said.
He also expressed disappointment with Brownback’s recommendation to immediately implement the 50 percent phase-down in itemized state income tax deductions rather than in 2017.
“Moving up the timeline for eliminating income tax deductions and spending the scheduled tax reductions will have a net effect of a tax increase on Kansas families and businesses,” Glendening said.
Dave Trabert, president of libertarian think tank Kansas Policy Institute, said the state should focus on cutting expenditures before launching tax hikes to balance the budget.
“Before asking Kansans to give more money to government,” Trabert said, “the governor should push for more cost reductions and the use of unnecessary carryover cash reserves.”
In 2012 and 2013, Brownback and GOP allies pushed through the Legislature supply-side economic reforms that included aggressive income tax cuts. The impact of those changes reduced state revenue by more than $700 million in the last fiscal year. The state’s deficits reflect that missing revenue and forced the anti-tax governor to propose increases in the consumption taxes on liquor and smoking products.
Annie McKay, executive director of the moderate Kansas Center for Economic Growth, said Kansans were being asked to pay for an experimental tax policy that had yet to demonstrate it would inspire sustained job growth.
“We must repeal the tax cuts of 2012 and 2013 — they are not the right policies for our economy or the people of Kansas,” she said.
Brownback responded to disclosure of deficits by imposing allotments and recommending withdrawal of $96 million from the Kansas Department of Transportation and $41 million from the Kansas Public Employees Retirement System.
On Friday, the official budget documents showed the governor was taking this fiscal year $150 million from KDOT and $52 million from KPERS. Brownback’s plan obligates extra KDOT contributions of $100 million to the general budget in the 2016 and 2017 fiscal years.
Mike King, secretary of transportation, said the financial adjustments would necessitate delay in projects totaling $297 million in 2015 and 2016. It wouldn’t have an influence on 2017 projects in the T-Works program, which is the state’s 10-year transportation improvement plan.
Read more from the Topeka Capital Journal here.