Archive for Friday, May 24, 2013

Senate Republicans approve 5-year, $879 million tax increase package

May 24, 2013

Topeka — The Kansas Senate, with only Republican support, on Thursday approved a tax plan that will increase taxes by $879 million over the next 5 years.

The measure would make permanent the 6.3 percent state sales tax, but lower the sales tax on groceries to 4.95 percent.

Over the next 5 years, it would also phase out itemized deductions, such as mortgage interest and property tax, and decrease the standard deduction. But it would also lower state income tax rates from the top rate of 4.9 percent to 3.5 percent, and the bottom rate from 3 percent to 2.5 percent.

"We see this as an overall tax cut," said Sen. Caryn Tyson. R-Parker.

But Sen. Tom Holland, D-Baldwin City, disagreed, saying, "This, make no mistake, is a tax increase."

The combination of the various tax changes will produce $879 million more in taxes over 5 years. Holland said the tax cuts are skewed to the wealthy, with low-income Kansans seeing an increase in their tax burden.

But Tyson said the lower food sales tax proposal "does get the money into the hands that need it."

Democrats joined Republicans in approving the lower food sales tax portion of the bill in a unanimous vote.

Republican Sen. Jeff Melcher, of Leawood, spoke against the lower sales tax rate on food, saying it would encourage more food purchases and obesity. But then he voted for it.

Kansas is one of only seven states that charge the full sales tax on groceries.

But Democrats, and some Republicans, parted company with Senate GOP leaders on the rest of the bill, including portions that extend the higher sales tax, reduce the state income tax, phase out itemized deductions and cut the standard deduction.

Democratic amendments to remove the entire sales tax from groceries and to keep itemized deductions used by hundreds of thousands of tax filers on mortgage interest and property taxes were defeated.

The total tax package was approved 24-15 with only Republicans in support, and now goes to the House on Friday for consideration as the 2013 legislative session hit overtime.

The Kansas Constitution specifies a 90-day session, but it allows legislators to meet longer. Thursday was the 90th day.

Republican leaders had vowed that this year's session would only go 80 days, but they have been at an impasse over taxes and the budget.

Under current law, the 6.3 percent state sales tax is set to decrease to 5.7 percent on July 1. It was approved in 2010 as a temporary measure to avoid deep budget cuts during the Great Recession.

But Gov. Sam Brownback wants to keep the rate at 6.3 percent to shore up the budget — depleted from income tax cuts Brownback signed into law last year — and buy down future income tax cuts.

Conservative Republicans, such as Brownback, are championing the phase-out of state income tax as a way to grow the economy, even if that means increasing sales taxes.

After the Senate vote on Thursday, Brownback issued a statement of support. "The tax proposal passed by the Kansas Senate Thursday night lowers the tax burden on all Kansans. I appreciate the work by the Kansas Legislature this session and will sign this pro-growth tax bill should lawmakers vote to send it to me,” he said.

But Democrats say the higher sales tax and elimination of itemized deductions hurts low- and middle-income Kansans.

"This is really bad tax policy," said Senate Minority Leader Anthony Hensley, D-Topeka. "I can't participate in tax policy that is just going to take this state down the road to ruin."

But Senate President Susan Wagle, R-Wichita, said she agreed with Brownback's philosophy that reducing income taxes would spur economic growth. She said the lower sales tax on food was a "sweetener" to lure House members to vote for the package.

Meanwhile, House Republicans have proposed setting the sales tax at 6 percent. That proposal was shot down as an amendment in the Senate, failing on a voice vote.

Wagle later issued a release saying the Senate was willing to work through the Memorial Day weekend to wrap up the session.

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