Friday, August 22, 2014

State sales tax holiday proposed for fall

By ELISE REUTER, KU Statehouse Wire Service | 3/14/2014

TOPEKA — Better than any back-to-school sale, Kansas legislators proposed a four-day tax holiday for next fall.

If passed, House Bill 2607 would remove the sales tax from school supplies, clothing, computers and software from Thursday, Aug. 7, through Sunday, Aug. 10 — just in time for Kansas consumers to buy much-needed school supplies.

TOPEKA — Better than any back-to-school sale, Kansas legislators proposed a four-day tax holiday for next fall.

If passed, House Bill 2607 would remove the sales tax from school supplies, clothing, computers and software from Thursday, Aug. 7, through Sunday, Aug. 10 — just in time for Kansas consumers to buy much-needed school supplies.

“I see it as a positive for what it does for Kansas families and Kansas businesses,” state Rep. Virgil Weigel, D-Topeka, said during the House Committee on Taxation’s hearing. “It gives a tax break to our working families. Families with children who are going to be sending their children back to school as well as grandparents who are purchasing school supplies for their children.”

Eighteen other states already have enacted similar tax holidays, including neighboring Missouri and Oklahoma. Weigel said tax breaks in other states draw Kansas consumers across the borders, detracting from local businesses during the weekend.

“I have no idea how many thousands of Kansans drive across the border just because they can purchase school supplies and clothing for their children, and not have to pay a sales tax on those items,” Weigel said.

While the tax break wouldn’t affect competition for cities in the center of the state, it could draw additional consumers to cities along the edges of Kansas.

“This is about equal opportunity for businesses, especially those that border the state,” state Rep. James Todd, R-Overland Park, said.

Todd suggested a few amendments that might make the bill more palatable. One was to allow individual cities to opt out of the tax break, provided this would not be a violation of the Streamlined Sales Tax Agreement. He also suggested legislators wait a year before enacting the bill to give sufficient time to plan for reduced revenues.

A sales tax holiday would decrease state revenues by about $5.5 million in 2015, according to estimates by the Kansas Department of Revenue. Local revenues are estimated to decrease by $1.4 million. The State Highway Fund also would decrease by $930,000, according to the bill’s fiscal note. The reduction would affect funding for schools and other services.

“Tax holidays are not the best policy. The benefits do not always follow along,” Larry Baer, with the League of Kansas Municipalities, said.

Baer argued that tax holidays do not increase consumption but merely shift the timing of purchases.

“If the intent is to give a tax break to low-income taxpayers, a more efficient and effective method is through the use of a low-income sales tax credit or refund,” Baer said in a written testimony.

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