TOPEKA – Republicans who control the Kansas Legislature gravitated Tuesday toward proposals that would increase the state’s sales tax to help eliminate a projected budget deficit but also considered lowering the tax on food.
GOP lawmakers remained split over whether to repeal an income tax break for business owners and farmers enacted in 2012, as the anti-tax group Kansas Club for Growth launched a statewide cable television advertising campaign to preserve it. Republican Gov. Sam Brownback champions the tax break as a “small business accelerator” but wouldn’t say Tuesday whether he’d veto a tax plan that repeals it.
The House and Senate tax committees reviewed multiple proposals Tuesday for raising new revenues to close a projected $406 million shortfall in the budget for the fiscal year beginning July 1. If legislators repeal the tax break for farmers and business owners, they'll rely less on boosting the sales tax or other taxes.
The state’s budget problems arose after legislators cut personal income taxes in 2012 and 2013 at Brownback’s urging as an economic stimulus. Brownback and many Republican legislators want to keep the state headed toward phasing out income taxes even as they fill the budget hole.
“I want to continue to move the cost of government onto the consumption side of the equation,” Brownback told reporters Tuesday. “The consumption side is paid partially by people traveling through our state.”
No tax plan emerged from either committee Tuesday, and the House panel rejected three plans to raise the 6.15 percent sales tax. But both committees expected to debate more proposals this week to increase the sales tax while also dropping the tax on packaged and unprepared food.
Senate committee Chairman Les Donovan, a Wichita Republican, outlined a $470 million tax plan Tuesday that would hike the sales tax to 6.5 percent but drop the tax on food to 6 percent. The House committee expects to consider dropping the tax on food to 5.9 percent.
Kansas is among a handful of states imposing its full sales tax on food, and advocates for the needy have long sought to decrease it or eliminate it. Democrats often have been ardent advocates of the idea – but they don’t want to boost the sales tax on all other consumer goods, arguing it would hit poor and working class families harder than wealthier ones.
The House committee rejected two proposals to raise the sales tax by a full penny on the dollar, to 7.15 percent. Rep. Tom Sawyer, of Wichita, the committee’s ranking Democrat, called those proposals “scary,” and even some GOP members said the increase would be too much.
Democrats and some Republicans want to repeal the 2012 break championed by Brownback, which exempted the profits of 281,000 business owners and 53,000 farmers from personal income taxes. Critics argue that the policy is unfair because business owners can escape income taxes while employees’ wages are still taxed.
Donovan’s plan replaces the break with an income tax credit equal to 1 percent of a business owner’s total payroll. The House committee approved a bill Monday to tax most of the now-exempt business profits at 2.7 percent.
Kansas Club for Growth plans to run its cable ads for at least a week, and GOP conservatives argue that the state shouldn’t abandon Brownback’s favored tax break.
“It leaves money in the hands of our job creators,” said Rep. Steve Brunk, a Wichita Republican.