Politics & Government

Kansas chamber opposes governor’s plan to extend sales tax increase

One of the most powerful lobbying groups in Kansas politics opposes Gov. Sam Brownback’s plan to indefinitely extend a temporary sales tax increase.

The Kansas Chamber of Commerce, which worked with Brownback and other conservative groups to oust moderate Republicans last fall, plans to tell a Senate tax panel that the state should spend its growing reserves before extending the sales tax.

“The state currently has healthy ending balances, which of course are also taxpayer funds,” the chamber wrote in testimony it plans to present Wednesday. “Why then should the Legislature ask the taxpayer for more revenue via sales taxes when current ending balances could be utilized instead?”

“It should be a last resort, not the first option out of the gate,” Chamber lobbyist Kent Eckles said of the sales tax hike.

The chamber is one of several business groups that plan to strongly support Brownback’s overall goal of eliminating income taxes during a hearing in the Statehouse Wednesday.

The chamber earlier signaled it might be willing to support keeping the sales tax rate at 6.3 percent instead of letting it fall to 5.7 percent in June – but only in exchange for lower income tax rates. Now the business organization seems to favor spending down reserves before opening discussion on extending the sales tax.

“If you need (to spend reserves) to get through a year or two until (revenues) takes off as a result of the last tax cut, we ought to look at that,” Eckles said.

Brownback has stood firm on his desire to maintain a 7.5 percent ending balance for the state. Over the past year, he has repeatedly boasted how the state had only $876 in the state treasury in July 2010 and that with growth and reforms his latest budget projects a $533 million balance.

Brownback’s tax plan, as outlined in Senate Bill 78, would lower the state’s bottom income tax rate from 3 percent to 2.5 percent in 2014 and 2015, before dropping it to 1.9 percent in 2016 and on. The state’s existing top rate of 4.9 percent would fall to 3.5 percent in 2017.

The plan would keep the 6/10ths of a cent sales tax due to expire at the end of June, which would provide about $262 million in additional state revenue a year. It also would eliminate the state’s portion of the mortgage interest and real estate property tax deductions.

Those moves help the state would maintain most core services, but they’ve drawn pushback from conservative Republicans and others who promised to let the sales tax hike expire or say the tax deductions are important to encouraging homeownership.