Topeka ? Businesses that seek tax breaks from the Legislature and groups that seek funding from the Legislature squared off Monday.

The House Tax Committee was considering a resolution to establish a three-year moratorium in granting new tax exemptions, tax credits and economic development incentives that involve the use of employer withholding taxes.

Groups representing schools, Kansans with disabilities and children supported the proposal, saying the state’s tax policy was failing to meet the state’s needs, especially during the current budget crisis where legislators face a $400 million deficit after cutting $1 billion last year.

“I searched for the Legislature’s policy on sales tax exemptions, and was shocked that there were no defined rules,” said Missy Taylor of Kansas Families for Education. “It was alarming to us that many of these exemptions are granted arbitrarily,” she said.

But the Kansas Chamber, several local chambers of commerce and other business groups were opposed to the resolution, saying it could impede economic development.

“The bottom line is it’s simply bad public policy to tie the hands of the state for an arbitrary period of three years thus making Kansas uncompetitive when what the state most desperately needs is new and retained high-paying jobs.” said Kent Eckles, vice president of government affairs for the Kansas Chamber.

House Concurrent Resolution 5028 is non-binding and, if passed, would express the will of the House.

The resolution was the first in several measures that the Tax Committee will be hearing this week. The panel also will be examining the state’s numerous tax exemptions.

Kansas Department of Revenue Secretary Joan Wagnon said “there has been an explosion of new sales tax exemptions in recent decades.” While tax exemptions are politically popular, they come “at the expense of those who do not get an exemption,” she said.

Since 1985, the number of sales tax exemptions has grown from 30 to 96; income tax credits from 6 to 43, and property tax exemptions from 43 to 102, Wagnon said.

The exemptions have been costly to the state treasury. For example, since 2003, the estimated value of foregone sales tax revenue from exemptions has increased from $3 billion to $4 billion in 2009, while lost revenue from income tax credits has grown from $410 million to $594 million, and the appraised value of real estate exempt from taxes has increased from $19.4 billion to $24.4 billion.

Wagnon said many of the exemptions are worthy, but the state needs to get a handle on the issue so that it can thorougly examine tax policies and priorities.

Tom Laing, executive director of InterHab, a group that represents Kansans with disabilities, said part of the problem is that the Legislature fails to consider tax and appropriations policies at the same time. “Tax committees and budget committees live in separate worlds,” Laing said. “Spending policies and tax policies are central to any rational consideration of a budget situation, but are rarely considered in the same discussion,” he said.