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Revenue secretary recommends eliminating some sales tax exemptions

TOPEKA – Secretary of Revenue Joan Wagnon went before the Senate and House taxation committees Thursday pitching her recommendation to eliminate certain sales tax exemptions.

The suggestion would garner about $200 million for state coffers. About $55 million in fiscal year 2011 would come from eliminating exemptions for various non-profit organizations, including Victory in the Valley and the West Sedgwick County- Sunrise Rotary Club.

Wagnon recommended a bill that would provide a exemption for all similar organizations or do away completely with the exemptions. The recommendations were developed by the Kansas Advisory Council on Intergovernmental Relations. Annual fundraisers such as Girl Scout cookies or popcorn for the Boy Scouts would be exempted under a rule allowing for annual fundraisers, Wagnon told the House Taxation Committee.

The bulk of the money — $140.28 million — would come from eliminating a state tax exemption on utility bills, she said.

That would be the most controversial exemption. Currently, people pay a local sales tax on their utility bills but not a statewide one, she said.

The House committee introduced the bill for discussion, but later in the morning the Senate Assessment and Taxation Committee declined to introduce the measure.

The council had decided to avoid exemptions that affected business and local government, she said.

Wagnon also recognized the list would be very hard for lawmakers to deal with.

"There are some things in that list that I cringe when I see," she said.

Lawmakers are looking for ways to plug a $400 million shortfall in the 2011 budget, which starts July 1. The governor proposed finding the money through a three-year, 1 cent sales tax increase and by increasing the tax on a pack of cigarettes to $1.34 from 79 cents and quadrupling the tax on wholesale tobacco. The increases would bring in about $380 million total.

By revoking the state tax exemption on residential utilities, the state could bring in about $140 million but the burden would be less than a sales tax increase, she said.

The full list of sales tax exemptions that the KACIR has recommended eliminating is available here.

For more, read Friday’s Wichita Eagle.