TOPEKA — A bill eliminating sales tax exemptions on utility bills and lottery tickets is headed for debate in the Kansas House.
The proposal essentially would impose the 5.3 percent state sales tax on all electric, gas and water bills. It also would repeal an exemption that allows churches to avoid paying sales tax on purchases.
It also requires a sales tax on lottery tickets — a move that would cost the state money. Adding the tax to the ticket price would exclude Kansas from multistate lottery drawings and the revenue they bring in.
The House Taxation Committee eliminated sections of House Bill 2549 that erased sales tax exemptions for specific nonprofits at the suggestion of Speaker Pro Tem Rep. Arlen Siegfreid, R-Olathe.
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The committee sent the bill to the full House with no recommendation Tuesday.
Lawmakers face an ever- growing shortfall for the 2011 budget, which begins July 1. State tax receipts for February fell $71 million short of expectations. The current budget hole is about $500 million.
Secretary of Revenue Joan Wagnon said Tuesday that the cash crunch could force the state to delay paying income tax refunds.
Removing the exemptions would pump nearly $170 million back into state coffers. The bulk of that — roughly $140 million — would come from eliminating a 1970s-era tax exemption for residential utilities.
Wagnon said she was "amazed" to see the measure moving to the full House. She had been prepared for the bill to never leave committee.
"This is a hard bill to vote for and an even harder bill to work," she said.
"I'm glad it didn't just die," said Rep. Julie Menghini, D-Pittsburg, ranking minority on the tax committee.
But she acknowledged even the revised bill will face tough challenges in the House.
"It's got a long way to go," she said.
Tax breaks and exemptions should be examined as lawmakers seek to shore up the budget, said House Speaker Mike O'Neal, R-Hutchinson. But O'Neal thinks many lawmakers likely share his concerns about taxing churches and utility bills during a recession.
"We shouldn't stifle this kind of debate," he said. "But my prediction is that there won't be any appetite for this."
Other tax proposals, including tobacco and liquor tax hikes and a general sales tax increase, have been suggested but so far have failed to pass the Legislature. Many lawmakers contend the state should cut spending before raising taxes.