Kansas Freedom Update

Tax Hike

Democratic Governor Kathleen Sebelius proposed increases in sales, income, and property taxes in her January 12th State of the State Address. In 2005, the plan raises sales taxes by .2 points to 5.5 percent, adds an income tax surcharge of five percent, and increases property taxes by one mill to 21 mills. By 2007, sales taxes will hit 5.7 percent and property taxes will reach 22 mills. (The Bond Buyer, 1/14/2004) According to the governor, a state court decision ruling Kansas’s school funding formula unconstitutional caused was partly responsible for this proposal. “District Judge Terry Bullock in Topeka ruled that the state discriminates against students in large and mid-size school districts while providing much higher funding per pupil to small, rural districts.” (The Bond Buyer, 1/14/2004) The Republican House Speaker Doug Mays opposed the plan in a response speech.

Shortly after Sebelius made her tax hike proposal, the Flint Hills Center of Public Policy, a Kansas think tank, determined that 3750 jobs would be lost as a result of the tax increases. Disagreement from the Republican controlled legislature spurred the governor to threaten a special session to meet the court mandated July 1st deadline. (AP 2/6/2004) The state Senate Assessment and Taxation committee passed the legislation by a four to three vote, but only allowed $251 million in tax hikes instead of $304 million. (AP 2/13/2004) The Senate Education Committee restored the tax increase to $304 million and submitted the bill to the entire Senate. Senate Democrats charged that the property tax was put back in order to kill the bill, but the committee chairman claimed that he wanted to give Governor Sebelius’s proposal a fair chance. On Thursday, February 27th, the State Senate killed the bill by a 35 to 14 vote. The governor convinced House leadership to continue debate on education in an attempt to push the bill there. (AP 2/27/2004)

Internet Taxes

The Kansas state government passed a “streamlined sales tax” law last session requiring tax collection at the place delivered instead of the place sold. This has put a burden on small businesses that have to deal with multiple tax rates instead of one. State House Democrats put forth a plan to give businesses $1,000 in tax credits for adjustment expenses. (AP 1/24/2004) This also allows for the taxation of out of state goods, particularly those on the Internet, creating a $100 million burden. (AP, 2/21/2004) The compliance date was set for July 1st, but many businesses began to voluntarily comply with the tax. Today, the State House of Representatives “tentatively” suspended this new system of taxation until Congress passes a related law and makes it constitutional. So far, voluntary compliance has cost consumers $6.5 million. (AP 3/8/2004)

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