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Republicans battle over taxes in Kansas, other states

(Recasts first sentence to reflect that the governor's veto was sustained)

By Karen Pierog

Feb 22 (Reuters) - Legislation to raise taxes in Republican-controlled Kansas to help balance the budget was defeated on Wednesday after the state Senate failed to override the governor's veto.

The Senate's 24-16 vote to override, which fell short of a two-thirds majority requirement, came just hours after the House overrode the veto. The measure would have increased individual income tax rates and ended a business tax exemption to raise an additional $590 million in fiscal 2018, which begins on July 1.

Republican Governor Sam Brownback said on Tuesday night that he planned to veto it "because the legislature failed to fulfill my request that they find savings and efficiencies before asking the people of Kansas for more taxes."

Kansas is not the only state with Republicans controlling both the governor's office and legislature to have skirmishes over taxes.

Michigan Governor Rick Snyder has pushed back against a legislative move to phase out the state's income tax by 2057. On Tuesday, House lawmakers revised the proposal to gradually reduce the rate from 4.25 percent to 3.90 percent in 2021, when it would result in a $1.1 billion drop in revenue, according to a legislative analysis.

"Half of a billion dollars will come due in 2019 and over one billion by 2022, years in which we have planned funding specifically to invest in modernizing our state's infrastructure," Snyder said in a statement.

In Oklahoma, where revenue is sinking, Governor Mary Fallin proposed expanding the sales tax base to services to raise about $834 million for the fiscal 2018 budget.

Lieutenant Governor Todd Lamb, who was elected separately from Fallin, resigned from the governor's Cabinet last week, citing the tax plan.

"While I respect the determination with which Governor Fallin met her obligation to present a balanced budget to the legislature, I cannot support her proposed tax increases," Lamb, who remains lieutenant governor, said in a statement.

In Kansas, Brownback enacted legislation in 2012 reducing tax rates by as much as 29 percent in a move intended to improve the state's business climate.

But state coffers have shrunk, causing Kansas to miss revenue targets. This month, S&P offered a pessimistic assessment on the state’s finances, revising the outlook on Kansas’ AA-minus credit rating to negative from stable, citing structural budget pressures.

(Reporting by Karen Pierog in Chicago; Editing by Matthew Lewis)