Archive for Wednesday, April 11, 2007

Tax cuts pass, but big decisions loom

April 11, 2007

The Lawrence Journal-World said in a recent editorial:

It may be only coincidence that temperatures have dropped back into the freezer just as Kansas legislators left Topeka for their spring break. Or it could be that these icy mornings are a reminder of the chilling effect some of the tax-cutting measures approved this session could have on the state in the years ahead.

Although approval of the state budget often lags into the Legislature's wrapup session, lawmakers managed to complete a budget just before their first adjournment this year. Other key issues, however, remain on the agenda for when the body returns from its three-week break.

Among their final actions last week was the adoption of tax cuts that benefit businesses as well as low-income and retired Kansans. The measures will phase out the business franchise tax over the next five years, increase the state's earned income tax credit, exempt Social Security benefits from state income tax for Kansans with adjusted gross incomes of less than $50,000 this year and $75,000 next year and expand a homestead property tax refund for low-income people who are 55 and older.

Legislators are touting the tax-cut package as a way to help older taxpayers and stimulate the economy. The cuts may do some of both, but it also will dig into the funds the state will have this year and in the future to meet basic state responsibilities.

The cuts will cost the state about $32 million this year, but by some estimates, that total will rise to $302 million by the time the measures are fully implemented five years from now. Even with the windfall some legislators predict from expanded gambling in the state, will the state be able to sustain those cuts without cutting back on important state services?

It's notable that despite their willingness to approve tax cuts, legislators have been unwilling or unable to deal with a couple of high-dollar needs that have been on their agenda since the first of the session. One is the $663 million in repairs and maintenance that reportedly are needed at Kansas Board of Regents universities. Another is a proposal to help some of the state's 300,000 uninsured residents buy health insurance.

It's also notable that while legislators were cutting taxes they also chose to give state employees a 2 percent pay increase along with an $865 bonus in December, a raise that barely keeps them up with inflation. In addition to crumbling buildings, state universities also may watch their faculties continue to crumble as key members are lured away to higher-paying positions in other states.

Legislators have found a way to balance the budget this year, but only by sidestepping university maintenance and health insurance issues. What do they plan to do in the years ahead when public schools and a new highway plan place additional demands on state revenues? And what will happen if an economic downturn cuts into the revenue sources that remain in the budget? The minimal tax relief that Kansas seniors will receive now, may be overshadowed, for instance, by cuts in the social services such as those that allow them to remain in their homes.

Tax cuts are a politically popular move, but government officials have a duty to weigh the desire to cut taxes against the need to meet important state responsibilities. It is hoped the 2007 Legislature is successfully finding that balance, but the tax-cutting, service-cutting cycle that Kansas experienced less than a decade ago certainly will raise some concerns across the state.

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