With tax revenue jumping in April, some Kansas lawmakers now say a lingering debate over whether to extend a state sales tax increase is all but history.
Tuesday’s upbeat numbers show that the sales tax rate can fall back to where it was before lawmakers boosted it in 2010 at the height of the national economic recession, they say. The figures fuel the argument that the state simply doesn’t need the money – at least not next year.
“These better-than-expected revenue numbers have just given us even more of a basis to steel our resolve on that issue,” said state Rep. John Rubin, R-Shawnee, who opposes extending the sales tax increase.
But Gov. Sam Brownback and the Republican-led state Senate aren’t buying that reasoning. They insist that added sales tax money is essential if the state is to stave off huge budget cuts. One forecast by the state’s consensus revenue group, issued just last week, said revenue will drop by $745 million, or 12 percent, during the next fiscal year.
“We have to cover these shortfalls,” said state Sen. Rob Olson, R-Olathe.
The latest revenue numbers may only deepen the impasse.
On Tuesday, the state Revenue Department announced that total tax receipts for April jumped nearly $42 million over April 2012. Revenue for the year’s first four months was about on par with revenue generated through the first four months last year – despite the sweeping income-tax cuts that Brownback signed last year.
“We’ve predicted that a fiscal environment where Kansans get to keep and invest more of their paycheck would bring economic growth to the state,” Revenue Secretary Nick Jordan said. “We’ve got to be pretty pleased.”
The confrontation between conservative Republicans over the future of the six-tenths of a cent sales tax is headed for a showdown next week when lawmakers return to Topeka for the wrap-up session.
Brownback has campaigned across the state in recent days in a bid to continue the tax, which he said will help make up for revenue lost through the big income tax cuts he signed into law last year.
He continues to advocate for a sweeping tax “swap” that results in lower income taxes in exchange for higher sales taxes.
But House members are looking at a different proposition. They say they promised voters that part of the 2010 sales tax increase would expire after three years. The tax was to be a temporary fix to get the state through a rough economic patch.
Lawmakers, such as veteran Rep. Scott Schwab, R-Olathe, say they aren’t about to break their word to constituents. The revenue numbers only make any argument to do otherwise that much weaker.
If the House does nothing, the sales tax rate falls from 6.3 percent to 5.7 percent on July 1, as scheduled.
“With those recent revenue numbers, we don’t have to pass a tax plan to balance the budget,” Schwab said.
He offered some advice to the governor: “At the end of the day, the votes aren’t there. They know the votes aren’t there. But why claim defeat before you have to?”
Life in the House is different from life in the Senate, Schwab said. House members, with their two-year terms, are up for re-election next year. Voters will not have forgotten the promise to lower the sales tax rate. Senators were just elected last year and have more than three years to go before they face voters again.
“By then, the whole thing is forgotten,” he said.
Sen. Anthony Hensley, D-Topeka, the Senate minority leader, said two weeks ago he assumed the House would wind up compromising on the issue. Maybe the tax would be extended by three-tenths of a cent, or half the size of the 2010 increase.
But the new revenue numbers have changed his mind. He said the new figures bolster the case that the increase no longer is needed this year.
“They’re really going to dig in their heels on that issue,” Hensley said of House members. “It makes it an uphill climb for the governor to get his sales tax increase passed.”
House Speaker Ray Merrick, R-Stilwell, said the revenue numbers do boost the case for not extending the sales tax increase. But late Tuesday, he sounded a conciliatory tone as he repeatedly used the word “compromise” to talk about the road ahead.
“I’m working on a compromise to get this thing moving,” he said. “ ‘Compromise’ to me means both parties have got to move. That’s what I’m working on.”
He said he hopes he doesn’t have to meet the Senate halfway. “But I’m leaving that open,” Merrick said.
Joe Aistrup, a Kansas State University political scientist, said the issue remains highly potent on the campaign trail.
After all, conservatives used the original sales tax increase to defeat some moderate Republicans and Democratic candidates in 2010 and again in 2012.
“It only takes somebody with money who can put together a circular, and all of a sudden a candidate can be tied with Barack Obama as another tax-and-spend liberal,” Aistrup said. “It happens just that fast.”