Topeka — Discussions continued Wednesday by Republicans to make the temporary state sales tax increase permanent and use those revenues to reduce Kansas income tax rates.
Sen. Pat Apple, R-Louisburg, vice chair of the Senate Assessment and Taxation Committee, said Kansas is competing economically with Oklahoma, which has been reducing its income tax rates, and Texas, which has no state income tax.
“That debate will soon find us,” Apple said.
The 6.3 cents per dollar state sales tax, which took effect July 1, is scheduled to decrease to 5.7 cents per dollar on July 1, 2013.
The House has approved a plan that would reduce corporate and individual state income tax rates for any fiscal year where tax revenues rise above last year’s total.
Supporters of the bill, which include the Kansas Chamber of Commerce and Kansas chapter of Americans for Prosperity, say the reductions in income tax rates will attract more business and industry to the state.
Opponents say the measure is irresponsible as the state already faces a $500 million revenue shortfall that has led to cuts in schools and social services. They also argue it would increase state government's reliance on the state sales tax, which hits low-income Kansans the hardest, and will deprive education, public safety and social services of any new revenues as costs increase.
Senate President Steve Morris, R-Hugoton, has expressed concerns about the House bill and essentially prevented it from going to a House-Senate conference committee.
On Wednesday, Apple and Sen. Terry Bruce, R-Hutchinson, passed around a proposal that would make the 6.3 percent state sales tax rate permanent, and use revenue from the portion that would have expired to reduce state individual income tax rates. The current individual income tax rates of 3.5 percent, 6.25 percent and 6.45 percent would be reduced to 3.2 percent, 5.8 percent and 6 percent.
The reductions would produce a $75 million hit to the state treasury in 2012, but would essentially be revenue neutral in succeeding years as the state sales tax rate of 6.3 cents would remain, legislative staff members said.
Apple said that the idea wasn’t an official proposal but that he wanted legislators to be thinking of ways to reduce income taxes.