North Newton Rep. Tim Hodge elicited gentle nods of approval Monday while outlining a bill cutting half the state’s sales tax on food.
He earned scowls and grimaces from House colleagues with three bills drafted to cover the revenue loss. His options were a 10 percent income tax bracket for couples making $1 million or individuals earning $500,000, a 10 percent tax on corporate profits over $1 million and doubling of the sales tax on vehicles valued in excess of $100,000.
Hodge, a Democrat, said the sales tax change would cost the state $163 million annually. The other bills would easily raise enough to cover that loss.
“We seem to trade one tax for another. Where are the dollars going?” said Rep. Ken Corbet, a Topeka Republican.
Hodge said dropping the 6.5 percent state sales on food to 3.25 percent would put $131 in the pocket of the average Kansan.
“That $131 means a lot more to someone making $30,000 versus someone making $500,000,” he said. “That will be an actual shot of adrenaline to our communities.”
In 2010, the Legislature raised the statewide sales tax from 5.3 percent to 6.3 percent for a three-year period to avoid budget cuts. It was scheduled to fall back to 5.7 percent, but Gov. Sam Brownback retained an elevated sales tax of 6.15 percent. Budget problems led lawmakers in 2015 to boost the rate to 6.5 percent.
Jeanette Pryor, legislative assistant with the Kansas Catholic Conference, said the organization supported House Bill 2616 to establish a modest tax rate on food. It will alleviate the burden on the poor as they try to purchase necessities of life, Pryor said.
Dave Trabert, president of the Kansas Policy Institute, said he didn't think much of Hodge’s idea of financing a sales tax break on the backs of wealthy Kansans.
“This is not going to be any kind of economic stimulus. It’s easy to say, ‘Wouldn’t this be great?’ The challenge is: How do you pay for it?” Trabert said.
Under House Bill 2661, the state would generate $296 million from a 10 percent tax on corporate profits above $1 million. Kansas’ standard corporate income tax rate is 4 percent with a surtax rate of 3 percent for corporate income above $50,000.
The new income tax rate for supremely rich Kansans, placed in House Bill 2618, would apply to 3,000 taxpayers and raise $307 million. The now-repealed 2012 state income tax cuts lowered the liability of these individuals from $306 million in 2012 to $103 million in 2013, Hodge said.
The plan to double the sales tax to 13 percent on noncommercial vehicles valued at more than $100,000 was denounced by the Kansas Automobile Dealers Association.
“I do not believe that there is any doubt a large percentage of vehicles with a selling price of $100,000 or more would not only be registered out of state, but would also be purchased out of state, eliminating any perceived revenue gain to the state, said Don McNeely, president of the association.