Governor Brownback Considers Sales Tax as Band-Aid for Broken Budget

When Kansas Governor Sam Brownback signed into law a $4.5 billion (over six years) tax cut package ealier this year, he told Kansans, “I think we are going to be in good shape.” He promised tens of thousands of new jobs and insisted “[w]e will meet the needs of our schools … Our roads will be built.”  But after claiming as recently as July that the state was in “an excellent fiscal position,” the Governor is conceding that even across-the-board spending cuts may not be enough to make up for the massive revenue losses (projected to be $2.5 billion over six years) from these tax cuts – that will go disproportionately to the state’s most affluent.  

The Governor received national praise from conservative quarters for the tax package he signed into law in May. The plan included income tax rate reductions, elimination of several low-income credits, completely eliminating taxes on some business income, and was supposed to put the state “on a road to faster growth.” But the reality is that tax cuts cost money and Governor Brownback is now indicating he is open to a sales tax hike to pay for them.

The current 6.3 percent sales tax (a temporary revenue fix from 2010) is scheduled to drop back to 5.7 percent in July.  The Governor’s own original tax package, proposed in January, would have permanently held that sales tax rate steady, and thus cost much less than the tax legislation he eventually signed.  His plan was also seriously flawed: the bottom 80 percent of Kansas taxpayers would have seen a tax hike under the Governor’s plan because it reduced reliance on the state’s income tax in exchange for a higher sales tax. But once again, Governor Brownback finds himself relying on a higher sales tax (even though he ran against it in his 2010 campaign) because of income tax cuts that gut his state’s budget.  He rationalizes the need for a sales tax increase by saying, “There’s going to be a two-year dip. That’s the nature of these, when you cut taxes. If you cut them right, you get growth on the other side, but there’s a dip first.”

Unlike a progressive income tax, sales taxes (PDF) require low and middle income taxpayers to pay more of their income in taxes than wealthier taxpayers. This way of handling what Brownback euphemistically calls a “dip” that results from radical tax cuts actually falls hardest on the Kansas families who can least afford it.