If Gov. Sam Brownback persuades the House next week to hang onto the higher sales-tax rate after June 30, he may avoid budget cuts to higher education, help offset last year’s income-tax cuts and further drive down the state income tax. As always, though, such action in Topeka could have ripple effects on local governments, including what it would do to their ability to use local sales taxes for local needs.
They’ve done so with success in the past. In 2004, for example, Sedgwick County voters opted to raise local sales tax by 1 percent for 30 months to collect $200 million and build what is now Intrust Bank Arena and a fixture of downtown life.
In 2008, staffers at the county and the city of Wichita floated competing ideas of 1 percent local sales-tax hikes – to retire debt at the county and to offset a property-tax cut at the city. More recently, local stakeholders have suggested using sales tax to fund economic development (Topeka and some other Kansas communities already do) and improved bus service – proposals that might be easier to sell if the statewide sales-tax rate dropped to 5.7 percent as scheduled July 1.
Plus, the Statehouse talk of whether to leave the sales-tax rate at 6.3 percent doesn’t reflect that many Kansans pay significantly more when state and local rates are combined, with rates of 8.3 percent or more common. The number of “community improvement districts” and “transportation development districts” – authorized with the Legislature’s blessing to encourage local development – also has grown to 75 statewide, requiring many shoppers within their boundaries to pay sales-tax rates of 9 to 10 percent. Wichita now has six CIDs, costing shoppers as much as 9.3 percent in sales tax. The state’s peak is 11.3 percent sales tax at the Goody’s Plaza CID in Junction City.
So lawmakers should realize that 6.3 percent sales tax, which may sound reasonable, is the floor but not the reality for most Kansans.
And the higher the statewide sales-tax rate, the more politically challenging it would be to raise sales taxes further locally for whatever worthy purpose. As Wichita business leader Harvey Sorensen put it in 2008, as the city and county were both eyeing the sales tax, “The sense you have is that the first guy at the table with the biggest fork wins.”
If Sedgwick County’s 30-month arena sales tax served as a model for the 2010 statewide hike, in that it was meant for a limited time and specific purpose, it also stood out because it ended as scheduled.
And if Brownback and the Legislature now make the statewide hike permanent, they undoubtedly will affect local communities in another way – making it harder for local voters to believe any future local leaders’ promises that a tax hike will be temporary.