by Murrel Bland
The solution to fiscal problems for state government is a one-cent hike in the sales tax.
At least that was the solution that State Sen. Steve Fitzgerald offered at as meeting of the Legislative Committee of the Kansas City, Kan., Area Chamber of Commerce Friday, May 8. Fitzgerald represents the Fifth District that includes Western Wyandotte County.
Fitzgerald, a New Yorker turned Kansan, said he doesn’t like tax increases, but this appears to be the simplest solution to Kansas money problems that a majority of legislators could approve and that Gov. Sam Brownback would accept. Fitzgerald and fellow conservative legislators met with the governor recently to find a solution to the estimated $400 million shortfall for next year’s budget.
Legislators are meeting in Topeka, hoping to find a revenue plan before the session is scheduled to end Friday, June 5. Various solutions have been offered including hiking the tax on alcohol and tobacco and stripping money from the transportation fund.
Liberal and moderate legislators have strongly criticized the governor for a plan to eliminate the Kansas income tax. Fitzgerald made it very clear that the sales tax hike has his support only if the “overarching goal” is to eliminate income tax.
Fitzgerald said that the states of New Hampshire and Tennessee do not have a state income tax and do quite well. I would note that New Hampshire pays its legislators $100 a year with no expense account. Kansas legislators receive $88.60 a day plus $129 a day for expenses.
According to a recent article in USA Today, there are seven states with no income tax – Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming. Fitzgerald is partly right when he says New Hampshire and Tennessee have no tax on earned income; however both states have a tax on interest and dividend income.
The seven states with no taxes on income are not in the same category as Kansas; they are big tourism attractors and have substantial promotional budgets. Kansas ranks near the bottom in tourism promotion dollars. And these seven states are rich in mineral or oil deposits or both.
The argument against hiking the sales tax claims it is regressive — that it discourages business. Those who are advocates for the poor say that those who can least afford it would be forced to pay it on such items as food.
As a practical matter, such a sales tax hike could mean that someone buying goods in the Wyandotte Plaza Shopping Center or the Legends Outlet could be paying about 11 percent sales tax. That could put merchants there at a disadvantage and chase shoppers to Missouri where sales tax could be 1 percent less or smaller.
Over the years, Kansas has had a balance among its three basic taxing sources —sales, income and property. Property tax has been the most stable and sales tax has been the most fluid. Income tax has usually been in the middle.
Kansas doesn’t have mountains or seashores—the natural attractions. Historically, it offers a quality of life that is very much tied to good schools — from pre-schools to universities. And although there is some oil and mineral production in Kansas, it pales compared to most of the seven states without income tax.
Fitzgerald told of another discouraging fact about state revenue — that state officials aren’t certain just how much money it has because it hasn’t opened the tax payments received earlier this year. To help solve this problem, employees from other departments have been borrowed to help the Department of Revenue open mail. So much for government efficiency.
Fitzgerald said if the one-cent sales tax hike does pass, it probably would result in the largest state budget ever. So what happened to the conservative legislators who wanted to cut overall spending? It doesn’t look like it will happen; tax revenue would simply be shifted from income tax to sales tax.
This one-cent sales tax proposal may be in trouble as a result of the Kansas House Taxation Committee action Monday, May 11. The committee passed, in a bipartisan action, a bill that would rescind the tax incentives that Gov. Brownback created. The vote was 13-8. The bill goes to the full house for debate.
Murrel Bland is the former editor of The Wyandotte West and The Piper Press. He is the executive director of Business West.