Closing the state’s revenue shortfall with a 1% increase in the retail sales tax would be better for the Kansas economy than cutting the budget by an equivalent amount, according to a new study from Wichita State University’s Center for Urban Studies and Kansas Public Finance Center.
A 1% increase in the sales tax would generate $350 million a year, but could reduce the state’s economic output by $363 million and cut jobs by 3,231.
However, $350 million in budget cuts would result in a $420 million reduction in economic output and cost 3,177 jobs.
The study, directed by WSU economist John Wong, found that the increase in the sales tax would cost the average Kansas family almost $80 a year in higher housing costs, $69 more for food, and $43 for transportation.
The latest study conflicts with an earlier report from the Center for Applied Economics at the University of Kansas that found a 1% increase in the sales tax would cost the state around 19,000 jobs.
Gov. Mark Parkinson has proposed a temporary hike to 6.3% from the current 5.3%. He said the higher tax, which would go into effect July 1 and expire in July 2013, would generate an additional $351 million a year.