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March 11, 2013

HAYDEN: Taking a cue from Kansas?

INDIANAPOLIS — Here’s a story to consider: A Republican governor with ties to the Tea Party and possible presidential ambitions decides he wants to slash the state’s income tax rate, but meets with massive resistance from legislative leaders from his own party. 

Sounds like the scenario playing out in the Indiana Statehouse, right? But I’m talking about Kansas Gov. Sam Brownback. 

Last year, Brownback fought a bitter battle with Republicans who control the Kansas legislature over his proposal to cut the state’s income tax rates. He won, after arguing the cut would spur the state’s economy and shoving aside lawmakers’ concerns about the significant hit it would take on state revenues.

One of his strongest allies in the fight: Americans for Prosperity, a conservative group funded by Charles and David Koch, billionaire brothers and influential conservative leaders who donated more than $200,000 to Indiana Gov. Mike Pence’s campaign. 

Last week, the head of AFP announced a “six-figure” ad-buy campaign targeting Indiana Republican lawmakers who’ve resisted Pence’s call for a 10 percent cut in the state income tax rate. Like their Kansas colleagues, they’re worried about the hit it will take on the state budget: $750 million over the next two years, and $500 million a year after that. Pence wants what Brownback got: A cut and a compliant legislature (the latter achieved after AFP and Brownback targeted in primary races the moderate Republicans who opposed his tax cut). But there’s more to the story. 

As chronicled in a recent Wall Street Journal story, Brownback is now stuck with a mess. Kansas’ official state economic forecasting agency projects that Brownback’s income tax cuts — which brings the rate down from 6.45 percent to 3 percent over five years and eliminates the tax for 200,000 small businesses — will result in a series of revenue shortfalls that add up to $2.5 billion by 2018. That’s a 20 percent projected drop in five years. Kansas, like Indiana, is required to balance its budget, so lawmakers face the prospect of making painful cuts to public services or finding other ways to raise revenue.

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