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Obama Trip to Kansas Keys Up State's Tax Battle

When President Barack Obama gave a major speech on the economy last week in Kansas, he aimed his message at a national audience, but he also framed an issue for state legislators to consider after they convene their annual session next year.

History led Obama to Osawatomie, with its 4,400 residents about 50 miles southwest of Kansas City, because there's no sense that anything the Democratic president says or does in the next 11 months will allow him to carry Kansas, which has given its electoral votes to every Republican presidential candidate since 1964. Osawatomie was the site of a 1910 speech by former President Theodore Roosevelt, extolling a "New Nationalism" that reined in corporate interests to help the downtrodden.

Obama argued the middle class is in peril and a key reason is many congressional Republicans' refusal to raise taxes for wealthy Americans to help solve the nation's financial problems. He said the U.S. needs to rethink its tax system to see that billionaires pay the same income tax rates as their secretaries.

The president didn't mention Republican Gov. Sam Brownback or his administration's work on proposals to overhaul the state's tax code. Nevertheless, Obama raised an important issue for Kansas legislators who'll consider the governor's yet-unreleased plan.

Brownback and officials in his administration have said the plan is designed to move the state toward a simpler and, in their view, fairer income tax and make Kansas more competitive. They've also said it won't reduce the state's overall tax revenues, meaning cuts in one area will be offset elsewhere, raising questions about who will benefit and who will pay more.

"We were trying to figure out: How do we get the message out?" said Kansas Democratic Party Chairwoman Joan Wagnon, a former state revenue secretary. "And here comes the president."

Brownback argues that Kansas is losing residents to states with lower income taxes and states without income taxes, and he contends lowering income taxes will spur economic growth. This year, the House, led by Brownback's fellow conservative Republicans, embraced a plan to phase out individual income taxes and cut corporate income taxes in half over time. A new group, Kansans for No Income Tax, has kicked off a public campaign.

A major debate on what constitutes fairness in taxation clearly is coming. Revenue Secretary Nick Jordan, a former state senator, said the governor wants to help all Kansans and move away from using the tax code for social engineering.

"We want obviously to put together the best economic growth strategy we can," Jordan during an interview last week. "We're just trying to figure out what is the fairest, simplest flat tax we can go to."

When Roosevelt gave his speech in 1910, the nation didn't have an income tax. A levy imposed by Congress in 1894 had been struck down as unconstitutional, and Roosevelt's fellow Progressive pushed and eventually won ratification in 1913 of the 16th Amendment to the U.S. Constitution. Roosevelt advocated a graduated tax, as he put it in Osawatomie, on "big fortunes."

In his speech, Obama argued wealthy Americans use "loopholes and shelters" to avoid paying income taxes, so they often pay less as a percentage than middle-class or poor Americans. Similarly, Wagnon said imposing higher tax rates on larger incomes recognizes that the wealthy can tap the expertise of lawyers and accountants more easily.

Kansans authorized a state income tax by adopting an amendment to their state constitution in 1932, setting the first rates during the administration of Gov. Alf Landon, also a GOP icon.

The state once had eight individual income tax brackets and imposed a tax as high as 9 percent. It now has three brackets, with the top rate at 7.75 percent, for the portion of single individuals' incomes above $30,000. For married couples filing jointly, the top rate is 6.45 percent, on the portion of their incomes above $60,000.

Brownback has suggested repeatedly that his administration will seek to reduce those top "marginal" tax rates, and Jordan said such a strategy is a good way to spur economic growth and make the state more competitive, particularly because many businesses, partnerships and sole-proprietorships pay individual income taxes, rather than corporate income taxes.

But the governor also has promised that the plan will be "revenue neutral." That's led to speculation by Wagnon and others that the administration could try to curtail exemptions, eliminate deductions or even end tax breaks for poor families.

That's why Wagnon viewed Obama's speech as helpful.

"It's so on target with the issues that we know are coming up in this legislative session," she said.

But some Republican critics of Obama's speech countered that the president would do better to concentrate on creating new jobs and creating a general prosperity that will help everyone.

And Jordan said: "I don't think we want to get into a discussion that we want to hit the rich or hit a certain part of our society. We want to think about all Kansans."

Roosevelt didn't win Kansas when he ran for a third term as president in 1912 as a Progressive. His bid under the Bull Moose banner split the GOP and allowed Democrat Woodrow Wilson to win the presidency and carry the Sunflower State. In fact, it was the last time Democrats won the governor's office and majorities in both houses of the Legislature.

Recent history also is against Obama in Kansas. He won nearly 42 percent of the vote in Kansas in 2008, the best showing for any Democrat in 20 years, but in 2010, Republicans swept all statewide and congressional races on the ballot by invoking his name.

Still, he's raised an issue that legislators can't avoid when they consider Brownback's tax plan.

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