The Republican-controlled Kansas Legislature approved a permanent sales tax hike in the early morning hours Sunday, as part of a plan to replace the state's income taxes with revenue from increases in other tax rates.
The plan will set the state's sales tax rate, which was scheduled to decrease from 6.3 percent to 5.7 percent, at 6.15 percent. The state's sales tax on food, which is among the highest in the country, will be set at the same rate. The sales tax hike was proposed by Gov. Sam Brownback (R), who hopes to eventually eliminate the state's income taxes altogether.
The state's top income tax rate is slated to drop from 4.9 percent to 3.9 percent over five years, and the bottom rate is set to drop from 3 percent to 2.3 percent over the same period. After 2018, any revenue growth over 2 percent would help reduce taxes further.
The move follows dramatic cuts to the state's corporate tax rates that Brownback signed last year. Kansas' tax policies were called the worst in the nation in April by a bipartisan pair of economists, because most tax revenue is derived from property and sales taxes. The economists questioned if the model would be able to sustain state government obligations.
Democrats argued after Sunday's vote that cutting income tax rates and raising sales tax rates disproportionately hurts poor and middle class people while boosting the rich.
State Sen. Tom Holland (D-Baldwin City) described the plan to the Kansas City Star as “nothing but disproven, discredited supply-side economic theory that benefits a very few at the expense of everybody else in this state."
The vote restored a food sales tax rebate, which enables low-income residents to file for a reimbursement in the following year's tax return. House Taxation Committee Chair Richard Carlson (R-St. Marys) cheered the move.
“We take care of the people in Kansas who need the help in Kansas," Carlson said.
Republican infighting over the sales tax rate had threatened the passage of the entire plan. Lawmakers had voted in 2010 to increase the sales tax rate from 5.3 percent to 6.3 percent to raise added revenue during the recession, but the rate was slated to fall back down to 5.7 percent on July 1. Brownback and the Republican-controlled state Senate wanted the rate to stay at 6.3 percent, while conservative Republicans in the state House of Representatives wanted the rate to be rolled back. Democrats and moderate Republicans in both chambers remained united in opposition to a tax hike.
Carlson said the outcome of the vote was a tax decrease, while Democrats characterized it as a tax hike. Allied Democratic groups took to Twitter to slam conservative Republicans for voting to increase taxes, foreshadowing a likely 2014 campaign attack.
The Koch brothers' Americans for Prosperity, which had criticized those who voted for the 2010 sales tax hike, described Sunday's move as a tax hike and called the vote a "partial victory."
“With regard to the statewide sales tax rate, however, it is unfortunate that legislators chose to impose a higher sales tax rate on Kansans," AFP state director Jeff Glendening said in a statement Sunday. "While the Legislature showed respect for taxpayers by lowering the overly burdensome sales tax rate, it was only a partial victory for Kansans’ pocketbooks because the rate did not return to the previously promised level of 5.7 percent."
The stalemate had pushed lawmakers into a 99th session day, past the 90-day annual session set by the state Constitution. While the debate continued past midnight, it never counted as a 100th day since lawmakers did not officially acknowledge the new day had begun. Each additional legislative day costs the state roughly $45,000.
The tax vote came as lawmakers narrowly passed a state budget amid last-minute arm twisting. Lawmakers from both parties had criticized parts of the budget, including cuts to higher education and the state Department of Corrections.
House leaders left the budget vote open for a period of time Saturday night when the yes column remained stalled at 57 votes, with 63 needed for passage. Rep. Stephanie Clayton (R-Overland Park), a moderate Republican who voted no on the budget, tweeted that House leaders had contacted lawmakers in opposition in an attempt to change their votes. Rep. Troy Waymaster (R-Luray) provided the final vote in favor.
The machinations in the House paled in comparison to the drama of the Senate vote, when the yes column stalled at 20 in the early hours of Sunday. Twenty-one votes were needed for passage. Three Republican senators had left the state on vacation, and Senate Vice President Jeff King (R-Independence) suddenly disappeared without voting. Sen. Steve Fitzgerald (R-Leavenworth) switched his vote to yes, and the bill passed. King was later discovered to be talking to Brownback outside the Capitol.