By Gene Meyer
January 26, 2010 

(KansasReporter) TOPEKA, Kan. - Raising Kansas sales taxes by a penny to balance the state budget would have devastating consequences on businesses across the state, opponents of a proposed increase told legislators Tuesday.

University of Kansas economist Art Hall told members of the Kansas House Taxation Committee that enacting the temporary three-year sales tax increase proposed by Gov. Mark Parkinson potentially could cause an estimated $2 billion reduction in Kansas' normal $120 billion annual economic output, as well as the loss of potentially 26,000 non-government jobs.

Those projections "are a simulation, not a forecast," Hall said, that represent a computerized estimate of the consquences that could occur from reducing Kansans' buying power over the proposed life of the tax.

Gov. Parkinson and other administration officials say the state's current 5.3 percent sales tax needs to be increased to 6.3 percent for the next three years to raise an estimated $308 million needed to balance the state budget for the 2011 fiscal year that begins July 1.

Backers of the proposed tax appeared before the Taxation committee last week to argue the money is needed to prevent further, potentially crippling cuts to schools, Medicaid and other social services, and state services following nearly $1 billion in funding cuts since early 2009.

But tax opponents on Tuesday said that the collateral costs of the proposed tax far outweigh the potential benefits.

Every convenience store owner in the state, for example, would be hit with a triple whammy if the sales tax and other proposed increases pass the legislature, said Tom Palace, executive director of the Petroleum Marketers and Convenience Store Association of Kansas.The other proposed increases include a 55 cent increase in tobacco taxes and a 15 cent to 17 cent increase in fuel excise taxes, which apply to about 85 percent of the sales volume at most convenience stores, Palace said.

With an estimated 38 percent of Kansans living in counties that border states with lower sales taxes, convenience store owners worry that "consumers won't change what they buy; they will change where they buy, Palace said.

Kent Eckles of the Kansas Chamber of  Commerce and Dan Murray of the National Federation of Independent Business in Kansas, cited surveys of their members decrying higher taxes and advocating lower government spending as alternatives.

"If we find out how we can use money more efficiently, we can cut spending without cutting services," said David Trabert, president of the Kansas Policy Institute, a Wichita advocate of free enterprise that also is the parent organization of KansasReporter.