Ag Policy Blog

Driving through Kansas last week I caught a radio ad, repeatedly, in which a married couple assailed the possibility that they could lose their home mortgage deduction. They ripped politicians for wanting to take more of their tax deductions and refund in the process.

The ad wasn't going after Congress or the Obama administration. It was going after Republican Kansas Gov. Sam Brownback. The ad was sponsored by the Kansas Realtors Association, which has become one of the biggest critics of a plan by Brownback to overhaul the state income-tax system.

If you want a small glimpse of what the battles would be like to reform, simplify or change the Tax Code, the Great Plains offers a couple of good examples right now.

Both Brownback and Nebraska Gov. Dave Heineman, a fellow Republican, have offered dramatic changes to state income taxes. Both are facing strong backlashes, mainly from different sectors of the business community.

In Kansas, Brownback wants to eliminate several deductions on income taxes including mortgage, real-estate taxes and charitable deductions, as well as earned-income tax credits for lower-income people. In return, Brownback's plan would lower the state's income-tax rates with the potential to eventually phase out income taxes.

Brownback also wants to keep a state sales tax increase in place that was expected to expire in July.

The Realtors argue the mortgage and real-estate deductions amount to more than $560 in average tax benefit for a home owner. The group began running radio ads campaigning against the governor's plan. As state lawmakers consider the proposals, the Realtors also are holding a rally next week in Topeka.

In Nebraska, Heineman wants to eliminate the corporate and individual income tax altogether while wiping out all the current exemptions on sales taxes, which amount to about $2.4 billion. Right now, most business-to-business sales are exempt from sales taxes. Some of Heineman's biggest opposition comes from the Nebraska Chamber of Commerce. The Omaha World-Herald quoted an executive from a major manufacturer who said his company would be better off moving across the Missouri River into Iowa if Heineman's tax plan is implemented. Agricultural groups also oppose Heineman's plan.

In Iowa, Republican Gov. Terry Branstad wants to reduce property taxes on businesses by modifying Iowa's complex series of property-tax rates and rollback provisions. There may be four people in Iowa who can adequately explain how this system actually works, but local governments are leery they may face lost revenue in the process.

A bigger battle in Iowa may come from state gasoline taxes. Business and agricultural groups have recognized Iowa's roads are a mess and funding is inadequate. Groups such as the Iowa Farm Bureau and Iowa Soybean Association support higher gas taxes if the money is going for road improvements. At least one bill would bump up the tax taxes by 10 cents over a three-year period. However, Americans for Prosperity in Iowa has launched a new initiative "No Gas Tax in Iowa" to stop a gas-tax hike.

I can be found on Twitter @ChrisClaytonDTN

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