TOPEKA – Gov. Sam Brownback wouldn’t discuss details Thursday after one of his top aides hinted that the administration’s forthcoming plan to cut income taxes also would affect Kansas’ state sales tax.
Brownback said during an interview with The Associated Press that his tax plan is still in development and that he’ll release the details Jan. 11, during his annual State of the State Address. He would say only that his goal is to make Kansas’ income tax simpler and fairer.
He and other administration officials have said they believe reducing the state’s top individual income tax rates will help spur economic growth. But they’ve also said that any cuts in income taxes would be offset by other changes, so that the plan doesn’t decrease the state’s overall revenues.
That’s led to speculation about how Brownback’s administration would propose offsetting income tax cuts, with changes in the state sales tax as a possibility, either by adjusting its overall rate or by eliminating exemptions to it.
Brownback told The Wichita Eagle that he wanted to broaden the tax base by eliminating or reducing some income tax credits and deductions, even those that carry into the state income taxes from the federal level. He also said that he probably would not eliminate any sales tax exemptions because former and current lawmakers warned him that taking on sales tax exemptions would be “a big fight for not a lot of money.”
Landon Fulmer, the governor’s policy director, said Wednesday during a meeting with the State Board of Education that the “tax plan will have a sales tax component.”
The Republican governor told the Lawrence Journal-World earlier this week that he won’t seek to lower corporate income taxes, though he declined to discuss specifics of his plan Thursday.
“It’ll be aggressive,” he told the AP. “It will be flatter, simpler, fairer. It will be pro-growth in its orientation.”
The state increased its sales tax in 2010 from 5.3 percent to 6.3 percent, to balance the state budget. But the rate is due to drop to 5.7 percent on July 1, 2013, a concession that Brownback’s predecessor, Democratic Gov. Mark Parkinson, used to sell an increase to the GOP-controlled Legislature.
The coming change could cost the state $311 million in revenue during the budget year that begins July 2013.
Senate Ways and Means Committee Chairwoman Carolyn McGinn, R-Sedgwick, has proposed dropping the sales tax to 5.7 percent at the start of 2013, arguing that the economy has recovered enough to fulfill the promise of a decrease six months early.
But Brownback also is proposing to overhaul how Kansas finances its public schools. His plan would take effect at the same time and promises a $45 million increase in aid that would mostly go to rural school districts.
When Fulmer outlined the school funding plan Wednesday, Board of Education member Walt Chappell, R-Wichita, questioned whether the state could afford it. He cited the coming drop in the sales tax and Brownback’s push for income tax cuts as reasons. Fulmer then mentioned that the tax plan would deal with the sales tax.
State Democratic Party Chairwoman Joan Wagnon, a former state revenue secretary, said the state has relatively few options if sales tax revenues are to fill any gap created by income tax cuts.
She said he could attempt to eliminate exemptions to the sales tax, though past efforts to do so have had only limited success with legislators. Kansas could keep the sales tax at 6.3 percent, lessen the coming decrease or drag it out. It also could divert sales tax revenues that now go by law to highway projects to general government programs.
Wagnon worries that any such changes, coupled with income tax cuts, would shift more of the state’s tax burden to poor and middle-class families.
“I certainly do have a huge concern about any plan that would offset income tax cuts with sales tax revenues,” she said.