In early 2010, the state’s business lobbies and their allies trooped up to testify in the Kansas Legislature, arguing that a temporary sales tax increase aimed at preventing deeper cuts in the state budget would hurt business and kill thousands of jobs.
These days, their objections have mostly disappeared.
It appears likely that Gov. Sam Brownback will propose that the sales tax – which was raised 1 percentage point to 6.3 percent in 2010 and is scheduled to drop to 5.7 percent on July 1 – remain at the higher level.
The revenue generated by the higher tax could be used to help fill the hole in the budget or could offset further cuts in income taxes.
Businesses big and small have largely reacted to a potential cancellation of the cut in the sales tax with a shrug.
Neither the Wichita Chamber of Commerce nor the Kansas Chamber of Commerce has taken a stance on the sales tax this year, instead saving political muscle to advocate for further cuts to personal income and corporate income taxes.
“We just haven’t talked about it,” said Barby Jobe, the Wichita Chamber’s vice president for governmental relations.
Local businesses that have traditionally complained about sales taxes over the years aren’t seeing much reason to complain in this instance.
Dawson Grimsley, owner of Davis-Moore Auto Group, said that personally he thinks lawmakers should keep their promise and let the tax go back down.
“My personal opinion is that when you put a tax up a half-percent or a percent for a reason, that once that reason is handled, then it should go back down,” he said.
But, he said, he doesn’t think the increase in 2010 hurt car sales, nor would a decrease help much, he said.
What most irritated Grimsley about the sales tax in the past is that it put him at a competitive disadvantage with car dealers in nearby counties because of differing local sales tax rates. The state, he said, solved that problem several years ago by assessing sales tax largely by where the buyer lives rather than by where the purchase is made.
Bob Finn, owner of Lytton’s Warehouse Showroom, agreed that the difference in sales tax wasn’t enough to change buying patterns in 2010 and won’t in 2013.
“They’ll come in and buy $7,000 worth of appliances, add up the ticket and they always say ‘Wow, that’s high,’ ” he said. “But if it’s $400, or $450, I can’t see that hurting our business.”
On the other end of the consumer scale, QuikTrip’s Mike Thornbrugh also downplayed the impact of the differential in tax rates on the sale of snacks and fountain drinks.
“Do we think it makes people think twice about buying more or less from QuikTrip? Probably not,” Thornbrugh said. “It’s just not a lot of money, merely pennies.”
Tom Palace, executive director of the Petroleum Marketers and Convenience Store Association, said his group is monitoring the sales tax issue during the session, but said the impact isn’t that big as long as the sales tax is consistent across the state.
The stance among businesses is a marked contrast to January 2010 when several business groups testified before the Kansas House Tax Committee that raising the sales tax from 5.3 percent to 6.3 percent to help plug a hole in the state budget would compound the economic downturn. Art Hall, director of the University of Kansas Center for Applied Economics, testified in 2010 that based on computer simulations, the tax increase could result in 26,000 fewer jobs and $2 billion less in personal income over six years, compared to making no change.
The Kansas Chamber’s Kent Eckles, the vice president for government relations, who blasted the 2010 proposal, said that the chamber might support retaining the sales tax at 6.3 percent under certain conditions.
If the money is used entirely to reduce income taxes, he said, they probably would support that plan. He said that the chamber’s CEO polls consistently show that business heads hate income taxes more than sales tax.
If the Brownback administration wants to spend it on education, highways or anything else in the state budget, he said the chamber would oppose the measure because government just needs to learn to operate more efficiently.
“There is no flip-flopping,” he said.
Nile Dilmore, the ranking Democrat on the House Taxation Committee, disagrees, saying that the Kansas Chamber isn’t pushing for lower taxes – just lower taxes for them. That money would likely go to cut corporate income taxes, he said.
“It is disingenuous in the extreme that business would flip-flop back to the support for the higher sales tax because the benefits now accrue to them,” he said.
But, he added, while lowering taxes on business owners and corporations might increase their profits, it doesn’t necessarily lead to business expansion and more jobs.
“It puts it their pocket and does nothing to spur demand,” he said.