Tax Reform Council hears about ways to change Kansas policies

A national tax expert on Wednesday outlined ways Kansas could update its state tax structure although he conceded it would be politically difficult to raise taxes during the current recession.

The Governor’s Council on Tax Reform was briefed by Richard Auxier, a senior policy associate with the non-partisan Urban-Brookings Tax Policy Center.

“Kansas like all states is in a tough position,” Auxier said. Because of the economic downturn created by the COVID-19 pandemic, Kansas faces an estimated $700 million budget shortfall.

Kelly has released a plan that spares K-12 funding, which makes up half of the state budget. But parts of that plan will require legislative approval.

Auxier reviewed options for Kansas to raise taxes to increase revenue and adapt to the changing economy.

He said many states have expanded their sales tax base to include services. “When sales taxes were created a 100 years ago, most people bought stuff,” he said. Now, increasingly, consumers purchase services, he said.

Kansas also could consider raising the top individual income tax rate, which at 5.7 percent is relatively low nationwide. Auxier said while raising taxes in a recession is difficult politically, using a progressive income tax would levy the increase on those would could better afford to pay it.

Kansas Department of Revenue Secretary Mark Burghart reviewed the Tax Reform Council’s recommendations from last year, which included expanding the sales tax base, applying the sales tax to digital products, reinstating a food sales tax rebate for low-income Kansans and collecting taxes on online purchases through marketplace facilitators.

Some of these proposals received committee hearings, but most didn’t progress during the 2020 legislative session, which was cut short by the pandemic.

The bi-partisan council was appointed by Gov. Laura Kelly in 2019 and is chaired by former Senate President Steve Morris, a Republican from Hugoton, and Janis Lee, a former Democratic state senator. Kelly also appointed to the council former KASB President Shannon Kimball, who serves on the Lawrence USD 497 school board.

State Budget Director Larry Campbell encouraged the council to have its recommendations completed a few weeks before Kelly starts Dec. 2 putting together her budget proposal for the 2021 legislative session.

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