Revenue secretary urges support for new tax package

Nick Jordan says tax increases needed to make additional tax cuts possible

0 | Budget, Legislature

— Kansas Revenue Secretary Nick Jordan today urged legislators to view Gov. Sam Brownback’s tax plan as a package instead of a collection of take-it-or-leave-it pieces.

“It’s a full package and you’ve got to look at it that way,” Jordon said. “We’re trying to get a nice, flat, simpler, fairer tax policy in the state of Kansas.”

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KHI News Service

Revenue Secretary Nick Jordan

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Appearing before the Senate Taxation Committee, Jordan tried to head off Republican opposition to some of the governor’s proposed tax increases, which he has recommended to help close an anticipated $503 million budget gap.

The expected shortfall stems from the largest tax cut in state history, which was signed into law by Brownback in May 2012 and became effective Jan 1. for this tax year.

To compensate for the loss of revenue, the administration has proposed making permanent the temporary increase to the state sales tax approved by lawmakers in 2010 when the refilling of the state coffers slowed with the economic recession.

Tax increases to pay for tax cuts

The 6.3 percent sales tax currently is scheduled to drop to 5.7 percent on July 1. Brownback officials also are asking legislators to eliminate the income tax deductions that homeowners can claim for mortgage interest and to offset local property taxes.

Jordan said if the governor’s package were taken as a whole, most Kansans eventually would see a net benefit. In other words, the already-approved and proposed future cuts in income tax rates would save most Kansans more than they would pay because of the additional sales tax and lost deductions.

The governor’s plan would reduce the state’s top individual income tax rate from 4.9 percent to 3.5 percent by 2017. Rates in the bottom bracket would drop from 3 percent to 2.5 percent in 2014 and then to 1.9 percent in 2016. Gradually eliminating the income tax would spur more than enough economic growth to prevent long-term revenue and budget problems, Jordan predicted.

Sen. Tom Holland of Baldwin City, the committee’s ranking Democrat, said a recent study by the Congressional Research Service found that cutting income taxes didn’t generate economic growth.

Jordan countered by pointing to a study by the nonpartisan Tax Foundation that he said showed that high corporate and individual income taxes discourage growth.

Sen. Les Donovan, the Wichita Republican who chairs the committee, said he believed there was widespread support in the GOP-controlled Legislature for the governor’s goal of fully eliminating the income tax, which Brownback has characterized as the “glide path to zero.”

But Donovan said it would be hard to sell many Republicans on the tax increases to balance the budget and avoid deep spending cuts while waiting for the benefits of income tax cuts to kick in.

“That’s going to be something we have to work at,” he said.

First, some clean up

Donovan said before the committee acts on the governor’s new proposal it needs to fix technical flaws in the tax-cut law passed by last year’s Legislature.

The biggest glitch involves a section of the tax code that governs how business ownership interests are valued and taxed. Unless corrected, last year’s law could actually increase the state tax liability of the very business owners it was designed to benefit, said Richard Cram, director of policy and research for the Revenue Department.

“As soon as this thing was enacted we began to get complaints from practitioners (accountants),” Cram said. “It wasn’t until after the bill was enacted and published that we discovered the provision wasn’t really drafted as intended.”

The clean-up bill — Senate Bill 79 — would repeal the so-called “basis” section of the existing law. It also would make several smaller technical corrections and add new language to clarify how producers can qualify for a severance tax exemption for the first 24-months of production from new pools of oil and gas.

Donovan said he hoped to pass the clean-up bill out of committee by next week.



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