Kansans are paying the ninth-highest state and local sales taxes in the nation, a new survey shows, but residents should not expect relief anytime soon, tax-cut advocates say.
Higher sales taxes are one of the costs of cutting or eliminating income taxes, which is a higher priority for many state lawmakers and Gov. Sam Brownback.
“Sales taxes have the least effect on business’ decisions to make the capital reinvestments that will cause our economy to grow,” said state Rep. Richard Carlson, R-St. Mary’s, who chairs the House Taxation Committee.
Kansas sales taxes were 23rd highest just two years ago, when the 2010 Kansas Legislature increased rates by a penny to stem a decline in state tax revenue. That penny amounted to a 19 percent increase from Kansas’ previous 5.3 percent rate, “and I knew it would put us in the top 10,” Carlson said.
Kansas’ higher sales taxes create some competitive problems for eastern Kansas retailers in Atchison, Leavenworth and Kansas City, who compete with Missouri, which has the nation’s 14th highest sales taxes, said Dan Murray, Kansas head of the National Federation of Independent Business, the nation’s largest advocate for small, independent business owners.
“I know that, because I live in the Kansas City area and I go to Costco in Missouri because it’s cheaper,” Murray said. “Even so, every time we survey our members, they tell us that controlling income taxes and property taxes are a higher priority than sales tax.”
He’s not alone.
“We know sales taxes make a difference over time, even if we can’t put a number on it,” said Ruth Comer, spokeswoman for Hy-Vee Stores Inc., a regional supermarket chain in West Des Moines, Iowa, with more than 20 Kansas City area stores on both sides of the Kansas-Missouri line.
“There is a noticeable segment of our customer base that is willing to travel a bit to save a penny or two,” Comer said.
Consumers who don’t have such opportunities to hop a state line to save money aren’t such big fans of higher sales taxes, said Evis Cranford, a 72-year-old retired Wichita school administrator.
“On a fixed income, you deal with basic necessities,” Cranford said.
“You keep an eye on where prices are best and, if you need to, you see what you can do without,” he said. “Higher sales taxes put a real burden on your income.”
In the big picture, macro-economic world where tax policy theorists work, that burden is not all bad, said Scott Drenkard, a research analyst at the Tax Foundation, a Washington,D.C.-based nonpartisan tax research and education provider that calculates state tax rankings.
“If you tax something, you’re going to get less of it,” Drenkard said.
“If you tax sales, you get less sales, which increases your opportunity to save and to invest,” he said. “Sales taxes are the only ones that don’t discourage investment. They are better than income taxes for economic growth.”
Kansans, on average, pay about an 8.26 percent sales tax on merchandise they buy, which is the ninth highest total in the nation, Drenkard reported in a Tax Foundation annual survey Wednesday.
Consumers in three neighboring states pay lower rates — 6.77 percent in Nebraska, 7.44 percent in Colorado and 7.49 percent in Missouri — Drenkard said. Oklahomans, who pay an average 8.66 percent, the nation’s fifth-highest rate, are the only Kansas neighbors who pay more, the survey showed.
The actual rates consumers pay in any of those states varies because cities, counties and other special taxing districts often add their own sales taxes to basic statewide sales taxes set by legislators.
Kansans or Kansas visitors, for example, pay sales taxes as high as 11.3 percent in a special Junction City hotel and shopping district off Interstate 70. Or they pay as low as the basic statewide 6.3 percent in more than three dozen counties where local governments don’t charge any local sales taxes.
“No one moves out of Kansas because sales taxes are too high,” said state Sen. Les Donovan, R-Wichita, and chairman of the Senate Assessment and Taxation Committee.
“They do move out, to Oklahoma, because our income taxes are higher,” Donovan said. “The governor is on the right track. We need to ‘incentivize’ businesses to move to Kansas.”
Donovan was referring to Brownback’s plan, unveiled in January, to cut Kansas income taxes as much as 24 percent immediately and eliminate them entirely after that by holding spending growth to 2 percent annually.
Carlson, the House Taxation Committee chairman, is proposing a broadly similar plan that curbs spending and cuts taxes, but doesn’t eliminate as many tax deductions and credits than Brownback’s proposal.
“True tax reform doesn’t occur in a vacuum without controlling expenditures,” Carlson said.
Both those proposals, along with a third tax reduction plan that was sidelined during the 2011 Legislature, “get our income taxes to zero,” said Kent Eckles, vice president for government affairs at the Kansas Chamber of Commerce, the state’s largest business lobby.
“We’ve got three vehicles to do that, and there are more to come,” Eckles said.
The chamber has no such plans to seek lower sales-tax rates.
Sales tax hikes may offset income tax