- Associated Press - Wednesday, May 13, 2015

TOPEKA, Kan. (AP) - A proposal to address the state budget shortfall by raising the sales tax and eliminating some income tax deductions cleared a Kansas House panel Wednesday, but some lawmakers said it wouldn’t leave enough money for contingencies.

The proposal sent by the House Taxation Committee to the chamber’s floor would raise the state sales tax to 6.85 percent from 6.15 percent and eliminate all state income tax deductions except mortgage interest, charitable donations and property tax payments.

With the legislative session in its final days, lawmakers are rushing to close a projected $406 million budget deficit for the fiscal year beginning July 1. The shortfalls arose after the Legislature sharply cut personal income and small business taxes in 2012 and 2013.

Like other proposals considered by the committee, this measure would continue to reduce the state’s lowest personal income tax rate, lowering it to 2.55 percent from 2.7 percent, and would drop the sales tax rate on food to 5.9 percent.

But it also would leave just $16.3 million in the state’s cash reserves, allowing little room for error if revenues fall short of their projections, said Republican Rep. Don Hineman from Dighton.

“It’s really skating on pretty thin ice,” Hineman said, adding that it is difficult to accurately project sales tax revenues.

“We don’t want to have to do this again next year, or the year after, and that’s the concern to me,” he said.

The plan also counts on reaping $30 million from an amnesty for residents paying back taxes. The state took in roughly that much after a tax amnesty in 2010, but Democratic Rep. Brandon Whipple from Wichita said he believes it is “wishful” to expect the same amount again.

Reserves are also important to ensure smooth payment of expenses because the state takes in revenue throughout the year, said Chris Courtwright, chief tax analyst for the Legislature. He estimated that a minimum of $50 million to $100 million in reserves is needed for cash-flow purposes.

But Republican Rep. Kasha Kelley, who helped craft the plan, said that she did not believe that the Legislature should use a tax increase to “pad the ending balance.”

“I fully believe that we need to do our job to get us back to relatively zero, which is what this plan does,” the Arkansas City lawmaker said.

She suggested that any additional revenues come from spending cuts.

A tax plan passed to the House floor by the committee Monday would impose a 2.7 percent tax on most of the profits from the 281,000 small business owners and 53,000 farmers who were fully exempted from taxes in 2012. But conservative lawmakers on the committee balked at the proposal as a reversal of a policy Republican Gov. Sam Brownback has called a “small business accelerator.”

Brownback told The Associated Press on Wednesday that he would prefer the Legislature continue to move away from income taxes and toward consumption taxes.

“We keep working with everybody and trying to get something to move forward that meets the budget needs, leaves a decent ending balance and moves us forward on a pro-growth agenda,” he said.

House Minority Leader Tom Burroughs, a Kansas City Democrat, said in a statement that the sales tax proposal would “balance the budget by raising taxes on working families and middle class Kansans,” and blamed “Brownback’s failed economic experiment” for the shortfall.

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Associated Press writer John Hanna contributed to this report.

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Follow Nicholas Clayton on Twitter at https://twitter.com/ClaytonNicholas


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