Kansas lawmakers are considering raising the state sales tax to plug a gaping budget hole.
A bill that drew attention in a House Taxation Committee meeting Wednesday would increase the tax from 6.15 percent to 6.5 percent, generating an estimated $164 million in 2016.
But some lawmakers are talking about pushing the sales tax even higher to avoid changing the income tax.
“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, a Wichita Democrat and the ranking minority member on the House tax committee.
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Lawmakers need to fill a budget hole of more than $420 million with some combination of tax increases and spending cuts for the budget to balance.
Increasing the sales tax would help boost state coffers immediately, said Rep. Marvin Kleeb, an Overland Park Republican.
“One of the benefits, if you want to call it that, of a consumption tax is you’ll start to collect that tax immediately, where income taxes will start to come in by paycheck withholdings and that’s a gradual process week by week or monthly,” Kleeb said. “You really need to have a combination of taxes to get your full solution.”
Kleeb noted that polling shows consumption taxes are more acceptable to the general 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 with only 26 percent who supported raising the income tax.
However, Kleeb said lawmakers need to be careful not to raise the sales tax 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.
Sawyer criticized the prospect of a higher sales tax.
“It’s unfair to look at that when we’ve got business owners making millions of dollars paying no (income) taxes,” he said.
Kansas is among 14 states that tax food bought at grocery stores, a fact highlighted by KC Healthy Kids, a health advocacy group that submitted written testimony against the increase.
“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, a Wichita Republican and member of the tax committee, said he is open to 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 the year like you do with income tax or property. So from that standpoint, it’s actually a little easier on people.”
The committee will hear testimony Thursday on a bill that would allow people to benefit from an income tax exemption for business owners only if the business has at least one Kansas employee.
“Those that have zero employees would have to pay taxes like everyone else,” Hutton said.
Kleeb said that 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. The chamber did not testify for or against the sales tax increase.