Border hopping offers no relief for Kansas sales tax increase

Crossing the state line to grocery shop outside Kansas might be effective as a tax protest, but it’s unlikely you’d save much, if any, money doing it.

Wyandotte and Johnson County residents who skip over to Missouri will pay slightly less in sales tax, but possibly not enough of a difference to cover the driving expense to get there.

And Wichitans who might be tempted to make a run for the Oklahoma border would actually find themselves paying higher sales tax there than they would in their hometown.

The most significant benefit from crossing the state line to shop would go to residents of the sparsely populated strip along the border of Nebraska, a state that doesn’t tax purchases of food at all and has a lower general sales tax than most Kansas communities.

A “We’re not gonna take this” attitude has surfaced in the Sunflower State since the Legislature voted earlier this month to raise the state sales tax from 6.15 percent to 6.5.

Gov. Sam Brownback signed the bill into law and the change takes effect on Wednesday.

The passage of the tax increase has some Kansans boiling, spurring social media vows to shop outside the state and calls for a total boycott of taxable shopping in Kansas on July 1.

Janice Bradley of the Wichita Peace and Social Justice Center said she’ll honor the one-day boycott.

“I won’t buy,” Bradley said. “I’ll try to extend it for a few days as well.”

She said what makes her angry is the governor and lawmakers raised sales taxes to protect a zero income tax rate for 330,000 owners of limited liability companies and Subchapter S corporations.

Bradley said whether it costs more or less to shop out of state is beside the point.

“Sometimes people can be real stubborn when they’re hurting like this,” she said. “And they could just take a stand to go ahead and do that, even though it might cost them a little bit more, just to make the point. It’s a matter of principle.”

Bob Beatty, a professor of political science at Washburn University in Topeka, said sales tax has that psychological effect on some people because unlike a property or income tax, it’s unavoidably visible in daily life.

“Every time you buy something, you get that tax handed to you and it’s like ‘crap!’ especially if it’s a big-ticket item,” he said. While people might get upset about income taxes once or maybe a few times a year, “That sales tax could happen five or 10 times a day that you feel like you’re getting whacked.”

Only Republicans voted for the sales tax increase and Kansas Democrats have railed against the package, calling it the “largest tax increase in Kansas history.”

But how big an increase in sales tax is it?

The U.S. Bureau of Economic Analysis estimates that Kansans spend about $20,000 a year per capita on consumable goods, excluding housing, utilities and health care.

Using that spending as a baseline, the added sales tax load per Kansan works out to about $70 a year.

Comparison shopping

To put the tax increase in real-world terms, The Eagle assembled a shopping cart of 56 food and 18 non-food items typically purchased at supermarkets.

Prices were drawn from supermarket ads published in Kansas, Missouri and Oklahoma the week of June 21 through 27.

The price of the items in the shopping cart totaled $232.79. Of that, $133.96 was for food and $98.83 was for non-food items including paper goods, toiletries and pet food.

The Eagle then calculated the state, county and local sales taxes that would be charged in Wichita, Overland Park, and Kansas City, Kan.; Kansas City, Mo.; and the closest border towns with supermarkets in Oklahoma and Nebraska.

The tax burden for the hypothetical shopping trip was highest in Blackwell, Okla. at $21.34, and lowest in Fairbury, Neb. at $7.41.

The new sales tax in Wichita calculates to $17.57, an increase of 93 cents over the old tax rate. Still, it wouldn’t make any sense economically to drive 65 miles each way to Blackwell to pay $3.77 more in sales tax.

And while taxes in Fairbury are less than half the rate of anywhere in Kansas, very few Kansans live close enough to take advantage.

The Kansas City metro area is a closer call, with Kansas butted up against Missouri.

The tax burden in Kansas City, Kan., for the shopping cart full of groceries worked out to $21.24 and in Overland Park, it was $20.65.

Both cities were higher than Kansas City, Mo., at $15.42.

That’s a $5.82 cent difference in tax between Kansas City, Kan. and Kansas City, Mo., and $5.23 difference from Overland Park.

The difference is mostly because Missouri taxes groceries at a lower rate than non-food purchases.

Over time, that adds up. A Kansas City, Kan., family that consistently shops on the Missouri side could save about $300 a year on sales taxes. An Overland Park family, about $272.

But it’s not for everybody, as savings dwindle quickly with distance to the supermarket.

Car operating costs of fuel, tire wear and car maintenance average out to about 17 cents a mile, according to the AAA Auto Club.

So unless you’re within about 17 miles of a Missouri supermarket – and much of the Wyandotte/Johnson county area isn’t – you’d probably be losing money by jumping the border to shop there.

Problems later

Beatty said there’s probably not enough of a tax differential at this point to send hoards of shoppers across the border, but the recent increase is enough to get people thinking that way.

“Unless people are ideologically upset, you probably won’t have too many people driving over (the state line) to get the lesser sales tax,” he said.

However, “especially for big-ticket items, it’s certainly something you’re going to consider that you might not have before.”

The real problem could come later, he said.

Brownback and the Legislature raised the sales tax to protect income tax cuts they passed in 2012 and 2013.

That limits their ability to use a temporary sales tax increase to fix an emergency budget shortfall, like Kansas did under Gov. Mark Parkinson in the depths of the Great Recession in 2010.

The Parkinson tax increase raised the sales tax from 5.3 to 6.3 percent and it was supposed to drop back to 5.7 percent in 2013.

Brownback and the Legislature didn’t let it. They passed a law setting the sales tax at 6.15 percent in 2013 and this year brought it up to 6.5 percent, two-tenths higher than it was under Parkinson’s emergency measure.

That leaves little wiggle room for the next recession or budget shortfall, Beatty said.

“As Mark Parkinson, and now Sam Brownback learned, the sales tax is a wonderful way to get some quick money,” Beatty said. “But you can’t keep doing that over and over or it does become ridiculous, it does become absurdly high.”

Senate Majority Leader Terry Bruce, R-Hutchinson, said he doesn’t expect the Legislature to have to raise sales taxes again like it did to cover the recession.

He said projections show the state will face another deficit next year but should be budget healthy after that.

He said recessions have the biggest effect on corporate and personal income taxes, while sales taxes are more recession-resistant.

“The further we get away from being dependent on those sources (income taxes), the more stable our balance sheet is going to be,” he said.

On sales taxes, “We just need to make sure we don’t cross that line to incentivize people to cross the state line,” he said. “One way to do that is having a lower sales tax on food.”

He said the Senate this year nearly got a split sales tax system with a lower rate on food, like Missouri has. And he said he thinks that idea will succeed sometime in the next few years.

This story was originally published June 27, 2015 at 10:43 PM with the headline "Border hopping offers no relief for Kansas sales tax increase."