Kansas Gov. Sam Brownback last week said he may ask that state sales tax rate decrease set for 2013 may be deferred because of revenue losses expected from a cut in the individual income tax rate.
The 2010 Legislature approved then-Gov. Mark Parkinson’s request for a temporary increase in the sales-tax rate to 6.3% from 5.3% to fund schools and public services as revenues fell during the recession.
The tax rate is slated to drop to 5.7% in July, with revenues from the remaining 0.4% increase dedicated to transportation needs.
The top individual income-tax rate of 6.45% will drop to 4.9% from 6.45% on Jan. 1, 2013. The measure also eliminated the income tax liability of almost 200,000 small businesses.
Brownback, a Republican, said the income tax cut will boost economic activity in Kansas in the long term, but revenues could fall for a year or more from the lower rate approved by the 2012 Legislature.
“There’s going to be a two-year dip,” Brownback said. “If you cut them right, you get growth on the other side, but there’s a dip first.”
Sen. Carolyn McGinn, R-Sedgwick, said extending the higher sales tax rate is a tax increase. McGinn chairs the Senate Ways and Means Committee.
Brownback opposed the 1% rate increase when running for governor in 2010, but earlier this year proposed making the 6.3% rate permanent as compensation for revenue decreases resulting from the income tax cut.
An analysis by the Kansas Legislative Research Department said the income tax cuts would return $231 million to taxpayers in fiscal 2013 and $4.5 billion over the next six fiscal years.
The analysis also said the state would see revenue shortfalls of $2.5 billion over the same period.
