TOPEKA, Kan. (AP) - Kansas legislators rejected a proposal Friday to repeal one of Republican Gov. Sam Brownback’s signature personal income tax cuts as they struggle to find the money to close a major budget shortfall.
The House voted 74-45 against a bill that would have repealed a personal income tax exemption for 330,000 farmers and business owners granted in 2012. The policy was part of a wave of personal income tax cuts enacted in 2012 and 2013 at Brownback’s urging in an effort to stimulate the economy, and other states have watched the fiscal experiment closely.
The tax cuts haven’t worked as envisioned, and the state has struggled to balance its budget ever since. Lawmakers must close projected shortfalls totaling more than $290 million in the current budget and the one for the next fiscal year beginning in July.
The repeal bill represented the biggest challenge yet to the conservative governor’s tax policies. It would have closed only part of the budget gap, but supporters argued it would have made the state’s finances more stable in the future.
Yet both Democrats and moderate Republicans, who in the past described the exemption for business owners as a mistake, split over the bill. Some argued that they should vote on an entire budget-balancing package at once. The prospect of helping Brownback out of a budget mess by voting for a tax increase - during an election year - also weighed on them.
“I do not see that people really want to raise revenue,” said House Taxation Committee Chairman Marvin Kleeb, a conservative Overland Park Republican who helped draft the plan and voted for it.
Many Republicans believe the exemption represents good tax policy and that eliminating it would hurt the state’s business climate. Brownback also has shown no sign of backtracking.
“The governor believes it does not help a pro-growth environment if you tax your job creators,” spokeswoman Eileen Hawley said.
The proposal to repeal the tax cut was drafted by three senators and three House members as a part of negotiations between the two chambers on tax issues, even though neither chamber has passed a version of it.
Republican Rep. Mark Hutton, of Wichita, one of the architects of the proposal, said the Senate could consider a less aggressive version. But Kleeb and Rep. Tom Sawyer, a Wichita Democrat also involved in the negotiations, said the idea is probably dead for the year.
Brownback plans to delay highway projects, divert road funds to general government programs and cut higher education spending. House and Senate budget negotiators discussed a proposal Friday to delay state contributions to public employee pensions, paying them back part of the state’s annual payments from a 1998 national legal settlement with tobacco companies.
Supporters of the tax bill argued that the state can’t solve its ongoing budget problems with such year-to-year patches. And many of them have viewed the exemption as a bad policy because business owners escape income taxes while their wage-earning workers cannot.
Under the proposal, the exemption for business owners would have ended Jan. 1. Legislative researchers said the plan would have raised between $205 million and $218 million a year, though the figure would have been only $61 million for the next fiscal year because of the January start date.
“It’s not the whole pie, as many of us desire,” said Rep. Sue Boldra, a Hays Republican who voted for the bill. “But certainly, for enough of us, this is enough to give us the opportunity to right the ship of state.”
The proposal drew strong opposition from business and anti-tax groups influential with Republican legislators. Kansas Chamber of Commerce CEO Mike O’Neal, a former House speaker, said the measure unfairly targets business owners and could force some to shut down their firms.
“These are the business owners who have taken all the risk,” O’Neal said. “It sends exactly the wrong message.”
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