TOPEKA (AP) — Gov. Sam Brownback signed massive income tax cuts into Kansas law during a statehouse ceremony Tuesday amid an ongoing debate over whether they'll open an age of economic prosperity or an era of permanent budget crisis.
Brownback's office set the signing for noon.
The governor and his fellow conservative Republicans argue that the cuts will stimulate the state's economy and generate new jobs. In the announcement of the ceremony, the governor's office described the bill as "pro-growth" and "one of the largest tax relief measures in state history."
The new law will cut top individual income tax rates for 2013 and eliminate income taxes for the owners of 191,000 businesses. Coupled with a sales tax reduction already scheduled for July 2013, the income tax cuts would provide $231 million in tax relief for the fiscal year beginning July 1, and the annual figure would grow to $934 million after six years.
Democrats and many moderate Republicans worry that the cuts will create massive budget problems and force the state to slash spending on public schools, social services, public safety and other programs. Their fears are based on a report from the Legislature's research staff forecasting a budget shortfall by July 2014 that, if left unchecked, would grow to nearly $2.5 billion by July 2018.
The new law will decrease rates for all individual income taxpayers, dropping the top rate to 4.9 percent from 6.45 percent for 2013. The standard deductions claimed by heads of household and married couples filing jointly also will increase.
Those changes would be offset by eliminating numerous tax deductions, credits and other breaks, including a rebate that poor families can now claim for the sales tax they pay on groceries. However, legislators rejected a proposal from the governor to eliminate a special tax credit for poor workers that often results in them receiving a payment from the state.
The business tax break targets the owners of partnerships, sole proprietorships and other small companies, allowing them to escape taxes on earnings that they currently have to report as individual income tax filers. However, many critics believe some large companies will change their legal structures to take advantage of the change.