State Tax-cut Plans Tempered By Caution In 2013

Tax code changes could be on the agenda in more states than unusual in 2013 because more legislatures will be dominated by like-minded members. The number of states in which one party controls both chambers will be at its highest mark in decades, and half the state legislatures will have veto-proof majorities.

The Institute on Taxation and Economic Policy, a Washington-based research group that advocates for a tax code that charges more to the wealthy than the poor, predicts that 2013 will be "a watershed year for tax reform." It says 15 states could enact major tax changes, including Republican-led legislatures in Missouri, North Carolina and Oklahoma and Democratic-led states such as California and Oregon.

The American Legislative Exchange Council, a Washington-based group of legislators and corporations that advocates for free-market policies, also expects more than dozen states to take up tax code changes in 2013.

"Many states are looking at Kansas to replicate parts of what Gov. (Sam) Brownback did," said Jonathan Williams, ALEC's director of tax and fiscal policy.

Kansas is cutting its individual income tax rates ⿿ lowering the top rate to 4.9 percent from 6.45 percent ⿿ effective in 2013 while also increasing the standard deduction for households and exempting the owners of 191,000 businesses from income taxes.

Brownback originally proposed to offset the income tax cuts by eliminating a number of deductions, including those for charitable contributions and home mortgages, and extending a temporary sales tax increase that is due to expire this July. But legislators decided to keep the deductions and Brownback signed the tax cuts into law anyway. He acknowledged in a December interview that Kansas now faces some short-term budget problems, but he insists the tax cuts are worth it.

"Our region has lagged the South and the Southwest on growth." Brownback told the AP. " ...This is our discussion on how we catch up."

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