Senate panel modifies tax plan; House OKs its own

TOPEKA, Kan. (AP) ? A Senate committee on Wednesday endorsed a modified version of Republican Gov. Sam Brownback's income tax package, setting the stage for a debate next week.

The action came on the same day the House voted 68-56 for its own income tax package, which includes an expensive repeal of the sales tax on food. Early estimates suggest the plan will reduce state revenues between $375 million and $425 million.

Brownback proposed collapsing the state's three income tax brackets into two and reducing rates. His plan would eliminate the tax on certain classes of business tax filers as well as a number of tax credits and exemptions. It also would trigger addition tax cuts if revenues grow by more than 2 percent in a fiscal year.

The Senate committee modified the plan, keeping some of the credits and removing the trigger for future cuts. The tax committee removed one sticking point for many legislators in both chambers ? an earned income tax credit for low-income tax filers.

The Senate will debate the package and the low-income credit in separate bills next Tuesday.

"Now that we have a bill out of tax committee, we will take a position on that bill," said Senate Majority Leader Jay Emler, a Lindsborg Republican. "I anticipate that something will pass. I haven't the foggiest idea what that may be."

He said that it would give senators a base for negotiating a final bill with the House. The timeline for those negotiations is unclear. Legislators are scheduled to recess on March 31 for three weeks before coming back to finish the session.

Brownback's plan would cut rates, starting in 2013. Married couples would face a top rate of 4.9 percent instead of the current 6.45 percent. Exemptions would be given to 191,000 operators of partnerships, sole proprietorships and other small firms from paying any taxes on their business earnings. And the standard deduction for heads of households would double to $9,000.

The governor's plan, as proposed, would cost the state about $90 million in revenues in its first year.

Sen. Tom Holland, ranking Democrat on the tax committee from Baldwin City, said senators would have a better idea of they want to do on taxes when the bill reaches the floor.

"I don't have any sense as far if you are going to see any unified consensus to pass some sort of tax cut. I'm not sure it's there yet," he said.

Holland would prefer doing more to reduce property taxes and perhaps gradually phase out the sales tax on food. He said those moves would keep more Kansas residents flush with money to stimulate the economy.

The House plan passed on Wednesday is the second sent to the Senate in the past two years. Supporters, including House Speaker Mike O'Neal, believe a tax package will be enacted. They also said the changes would create jobs.

"I'm more optimistic today than I've ever been that the Senate will come out with something. Obviously, I'll be very disappointed if they go two years in a row without addressing tax reform," said O'Neal, a Hutchinson Republican.

The House plan would lower the tax rates in all income brackets and require any growth in state revenue above 3 percent to be used to cut taxes further. It also retains popular income credits and exemptions, including the earned income tax credit for low-income tax filers.

The House plan would also phase out earnings taxes for thousands of partnerships, sole proprietorships and other small businesses. And the sales tax rate would drop to 5.7 percent from 6.3 percent in July 2013, as previously scheduled.

The House's elimination of sales taxes on food would cost the state an estimated $350 million annually.

Criticism of the House plan crossed party lines.

Democrats argued the cuts would reward wealthy taxpayers and businesses and shift the burden to low-income residents. Conservative Republicans offered a mixed bag of complaints, ranging from its hit to state revenues to it not eliminating income taxes entirely.

Source: http://news.yahoo.com/senate-panel-modifies-tax-plan-house-oks-own-211550345.html

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