Kansas lawmakers consider raising sales tax

TOPEKA – Kansas lawmakers are considering raising the state sales tax to plug the state’s budget hole.

HB 2429 would increase the tax from 6.15 percent to 6.5 percent, generating an estimated $164 million in 2016. The House Taxation Committee reviewed the bill Wednesday.

But some lawmakers are talking about pushing the sales tax higher to avoid changing income taxes.

“I’ve heard anywhere from 6.3 to 7.15, so they definitely seem to be taking a hard look at sales tax, which is again unfair,” said Rep. Tom Sawyer, D-Wichita, the ranking minority member on the House Tax Committee.

Lawmakers need to fill a budget hole of more than $420 million with some combination of tax increases and spending cuts. Many economists blame the shortfall on the state cutting income tax rates and eliminating taxes for business owners in 2012 without proportional cuts in spending.

Some lawmakers want to revise the 2012 income tax changes to help fill the budget hole. Gov. Sam Brownback has resisted that and has called for the state to rely on consumption taxes rather than income taxes. The sales tax is a consumption tax.

Increasing the sales tax would help boost state coffers immediately, said Rep. Marvin Kleeb, R-Overland Park.

He noted that consumption taxes are more acceptable to the public than other taxes. A poll from Fort Hays State University released last month showed that 66 percent of respondents favored raising the sales tax, compared to only 26 percent who supported raising income taxes.

However, Kleeb said lawmakers need to be careful not to raise sales taxes so high that people shop in other states.

“If we got to 7.5 percent or 7.15 percent … would that be a high enough sales tax rate that it would drive business across the state line? I think consumption taxes are acceptable. We just don’t want to make them too high,” he said.

The state’s sales tax has been as high as 6.3 percent. It was boosted to that in 2010 as a temporary measure in the wake of the recession. But in 2013, instead of letting the sales tax fall from 6.3 percent to 5.7 percent as planned, lawmakers decided to let it drop to 6.15 percent, in part to help offset money lost from income tax cuts.

Sawyer criticized the prospect of a higher sales tax. “When we’re taxing food, I mean, that’s a very basic part of life and that affects the poor and the middle class much harder than it does wealthy persons. ... It’s unfair to look at that when we’ve got business owners making millions of dollars paying no (income) taxes.”

Kansas is among 14 states that tax food bought at a grocery store, a fact highlighted by KC Healthy Kids, a health advocacy group that submitted written testimony against the increase.

“Most other states exempt food or apply a much lower sales tax rate. Food is not a luxury item, and increasing the state sales tax rate will only cause a heavier burden on low-income Kansas families and children,” said Ashley Jones-Wisner, the group’s state policy manager.

Rep. Mark Hutton, R-Wichita, a member of the tax committee, said he’s open to the idea of raising the sales tax but is concerned about the hike on groceries. He would support lowering the tax on groceries while raising it on other items.

Hutton also said other states offer a tax credit against sales tax for people of certain income levels, which he said could help ensure the poor aren’t disproportionately affected.

“But what you like about sales tax is it’s kind of a micro, you know, death by a thousand cuts,” Hutton said. “Nobody has to sit down and write that big check at the end of year like you do with income tax or property. So from that standpoint, it’s actually a little easier on people.”

The committee also will hear testimony Thursday on HB 2430, which would make changes to an income tax exemption for business owners.

The bill, which was introduced by Kleeb, would allow people to benefit from the exemption only if the business has at least one Kansas employee. “Those that have zero employees would have to pay taxes like everyone else,” he said.

Kleeb said this would help tie the exemption more closely to job growth, which was lawmakers’ intention when they passed it in 2012.

The Kansas Chamber of Commerce has been vocal against any changes to the tax exemption for businesses and will oppose the idea on Thursday. The chamber did not testify for or against the sales tax increase.

This story was originally published May 6, 2015 at 3:01 PM with the headline "Kansas lawmakers consider raising sales tax."