TOPEKA — House and Senate negotiators today reached accord on a new plan that would reduce state income taxes incrementally over five years.

The proposal, beginning in tax year 2013, would scrap the current three income tax brackets in favor of two. The lower bracket would be 3 percent on the first $15,000 of income for singles or $30,000 for joint filers instead of the current 3.5 percent. The upper bracket would be 5.5 percent in 2013 and 2014 for income above $15,000 for singles or $30,000 for joint filers and then begin dropping in stages to reach a top rate of 4.9 percent in 2017. The top rate currently is 6.45 percent.

Republican members of the negotiating team said they were convinced the plan would spark economic growth but they did not accept the more optimistic revenue projections released Wednesday by the administration of Gov. Sam Brownback in an effort to sell a quicker reduction in the top rate.

House Tax Committee Chairman Richard Carlson characterized the administration's projections as "dynamic scoring," and said legislators would stick with the more conservative projections developed by the Legislature's research arm.

Even so, the plan Carlson and fellow GOP members endorsed would leave a projected ending balance of $680 million for the coming fiscal year and leave the state with positive balances in each of the next five years, though the anticipated reserves would decrease each year to a projected low of $165.4 million by fiscal 2018.

State law requires a yearly ending balances of at least 7.5 percent of the state general fund total but the Legislature more often than not overrides the requirement. The plan would leave the state with a projected 11.1 percent ending balance in fiscal 2013, dropping to 2.4 percent in 2018.

The forecasts did not take into account new spending approved by the Senate on Wednesday. They did, however, take to account the $367 million in reduced state Medicaid spending over the next five years that Brownback officials have predicted would result from implementing their Medicaid makeover plan, which they have dubbed KanCare.

Administration officials say the plan would save the state and federal governments $853 million by fiscal year 2017. The federal government covers about 60 percent of the cost of the Medicaid program.

The state's share of the program has been one of the fastest growing draws on the treasury in recent years and it remains to be seen whether KanCare's projected savings will materialize.

As part of the agreement tentatively reached today, the bargaining panel agreed to retain the child care tax credit that the governor had proposed eliminating when he unveiled his own tax plan earlier this year.

"We got an awful lot of calls and letters and emails on that," said Sen. Les Donovan, the Wichita Republican who chairs the Senate Taxation Committee. "That will bring back a very popular credit that gets used quite a bit."

The plan also would allow low-income, working Kansans to continue to claim the Earned Income Tax Credit, which the governor also proposed ending. Or they could get a refund for taxes paid for food purchases. They couldn't claim the refund and the earned income credit.

Other elements of the plan:

• The current 6.3 percent state sales tax is scheduled to drop to 5.7 percent in July 2013. The agreed-to plan would keep that scheduled reduction intact. The governor had proposed keeping the sales tax at its current rate to help offset reduced income taxes.
• The proposal would allow deductions for mortgage interest and charitable contributions but only for filers who also itemize on federal returns and whose deductions would exceed the current standard deductions.
• The majority of itemized deductions would be repealed.
• About $45 million would be provided to local governmental units in 2013 to help ease local property levies.
• Renters no longer would be allowed to use the homestead exemption program, which is used mostly by older taxpayers or the disabled earning about $30,000 a year. But the program's eligibility would be expanded to make it available to those with slightly higher earnings.
• By 2017, taxes on business income for sole proprietors, limited liability partnerships and subchapter S corporations would be phased out. For the qualifying businesses, earnings up to $100,000 would be exempt in tax years 2013 and 2014; earnings up to $250,000 would be exempted starting in 2015 and then all earnings would be exempt by 2017.

The new plan earned plaudits from the Kansas Chamber. J. Kent Eckles, one of the organization's lobbyists, predicted it would boost the economy and employment.

Job loss in Kansas since 2008, "we believe was a direct result of the tax-and-spend policies of the past," he said. "It's time for a new direction."

But former Kansas Revenue Secretary Joan Wagnon, now head of the Kansas Democratic Party, said the plan would shift more of the tax burden to average working people.

"It's an improvement over what they had because they included the child care credit," she said. "But it still has the same flaws. They could have broadly lowered all rates instead of benefiting businesses they way they did. They're putting the burden on wage earners, which is not fair."

Last week, a group of 48 former Republican legislators urged lawmakers to reconsider their plans to reduce the income tax, saying it would unfairly shift the tax burden and also undermine funding for public schools.

The plan still needs formal approval from the conference committee, which will be delayed because the two Democratic members of the panel opposed the plan. It is expected to pass the House, but its fate in the Senate remains murky because support for it there is thought to be thinner.

"Frankly, we need to do something," Donovan said during today's negotiations. "We have spent so much time working on this without any headway and time is running out."