The Kansas House Committee on Taxation has endorsed a bill to repeal the 1% increase in the state sales tax that lawmakers approved last year. The increase, to 6.3% from 5.3%, went into effect July 1.
The House is expected to consider the bill this week.
The legislation raising the tax rate devotes 0.4% of the new rate to support of bonds issued by the Kansas Department of Transportation for its 10-year program. The sales tax rate is set to drop to 5.7% in July 2013, but the 0.4% hike for the transportation program will remain in effect.
Supporters of the repeal said the higher tax had slowed economic activity in Kansas, but Rep. Nile Dillmore, D-Wichita, said the state cannot afford to lose the $390 million of revenue from the higher rate.
“Repealing that one-cent sales tax increase is going to make us go from a $550 million deficit to about a $900 million deficit,” he said.
The repeal measure is opposed by Republican Gov. Sam Brownback and the Kansas Chamber of Commerce.
The 10-year Transportation Works for Kansas program, approved by the Legislature in May 2010, allows KDOT to issue bonds totaling up to 18% of its revenue each year into the highway fund.
Based on projected revenue, the debt cap would support a total of $1.7 billion of bonds over the 10-year period.
Sales tax revenue dedicated to the highway fund are expected to total $289.5 million in fiscal 2011 and grow to $497.6 million in fiscal 2015.