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VOL. 42 | NO. 17 | Friday, April 27, 2018

After tax cuts many saw as a failure, Kansas may cut again

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TOPEKA, Kan. (AP) — Kansas has some financial breathing room less than a year after legislators reversed past income tax cuts to deal with persistent budget woes that followed what many voters saw as a failed fiscal experiment. Now some Republicans want to go back to slashing taxes.

The state Senate's GOP leaders are pushing the idea. Their chances of success are good enough that critics are questioning whether lessons from the state's recent fiscal miseries sunk in after former Republican Gov. Sam Brownback's policies made Kansas a national example of how not to do trickle-down economics.

But top Republicans in the GOP-controlled Legislature feel compelled to act in an election year — like lawmakers in many other states — because of changes in federal income tax laws engineered by President Donald Trump. Those changes have some Kansas residents facing higher state income taxes after state lawmakers boosted their burden last year.

"It's going to be a double whammy to all the taxpayers," said Senate President Susan Wagle, a conservative Wichita Republican who's leading the charge.

After years of budget pain and disappointing tax collections, Kansas officials are feeling more optimistic. Last year's tax increase is filling the state treasury and the economy is stronger, with revenues exceeding expectations.

Wagle and other GOP lawmakers argue that they're not attempting to cut taxes so much as "return the windfall." A bill approved by the Senate earlier this month went further, increasing the state's standard income tax deduction and several other deductions, and some lawmakers have other tax-cutting priorities, such as lowering the state's sales tax on groceries.

Reducing taxes also would undercut the Legislature's efforts to meet a Kansas Supreme Court mandate to increasing funding for public schools. Lawmakers approved a plan meant to phase in a $534 million increase over five years, but projections from their research staff this week suggested that the higher spending can't be sustained over time if lawmakers also reduce revenues.

Nor has the state fully recovered from the financial problems that followed the Brownback tax-cutting experiment. It's still siphoning funds from highway projects for general government programs and hasn't fully caught up on its annual contributions to public pensions. Many lawmakers think spending outside of education remains too tight.

"The strongest political impulse ought to be to stabilize Kansas financially," said Duane Goossen, a former budget director for both Democratic and Republican governors and a strong critic of the past tax cuts. "It's almost unbelievable to me that there's even a serious consideration in the Legislature about cutting some part of the state's revenue stream."

The debate is likely to be settled within the next 10 days. Lawmakers ended an annual spring break Thursday and returned to the Statehouse to wrap up their business for the year.

Democrats partnered with moderate Republicans last year to override Brownback's veto of the $600 million-a-year bill reversing most of his income tax cuts and now see at least a few GOP moderates open to offsetting federal tax changes.

"I don't think it makes any sense for us to go down this path again," said Senate Minority Leader Anthony Hensley, a Topeka Democrat. "I think people will say that there is no way that they learned their lesson."

But Scott Drenkard, director of state projects for the conservative, nonpartisan Tax Foundation, sees the criticism as overstated. His group strongly criticized Brownback policies and saw Kansas' experience as a cautionary tale but is not criticizing this year's push.

Drenkard said the tax cuts engineered by Brownback were far larger than what lawmakers would consider this year. State forecasters project the state's "windfall" at $105 million for the budget year beginning July 1, and legislative researchers said it would be roughly $150 million each year afterward.

Furthermore, Drenkard said, most states with income taxes are wrestling with similar issues because their tax laws are tied to federal ones. While federal taxes drop, many Kansas wouldn't be able to claim itemized deductions on either their state or federal forms, increasing their state taxes.

"If legislators don't act, this is an automatic tax increase," Drenkard said.

Politics are a key factor in the Kansas debate. All 125 House members are up for re-election this year, as is Republican Gov. Jeff Colyer, who replaced Brownback after Brownback resigned to take an ambassadorship.

Tax cuts remain an easy sell to the GOP's right-leaning base, particularly if they head off new and unexpected pain for individuals and business owners.

Colyer is in a tough primary race. One rival, conservative Secretary of State Kris Kobach, promises "full throttle-conservatism" and has called for not only returning any windfall but rolling back last year's tax increase. Many conservatives argue that Brownback's tax-cutting experiment went bust with voters because he and lawmakers wouldn't cut spending enough.

As for Colyer, spokesman Kendall Marr said the governor "will be happy to consider any legislation that arrives on his desk that reduces the tax burden on hard-working Kansans."

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