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Last Updated: May 26th, 2010 - 17:07:52 |
OVERLAND PARK, Kan. - Kansas’ economy – and its taxpayers – would be a lot better off if the state scrapped its current income tax system and replaced it with a single, 8 percent sales tax, says University of Kansas economist Art Hall.
Hall, executive director of the university’s Center for Applied Economics, said a proposed 8 percent retail sales tax would replace 36 other state level taxes, including personal and corporate income taxes and would help make Kansas one of the most growth oriented state tax environments in the nation. Kansans would still pay local school district and property taxes, however.
The mechanics of such a tax plan, which Hall outlined Thursday evening in Overland Park before a meeting of FairTaxKC tax reform activists, are simple, he said.
“But the politics, as you can imagine, are brutal,” Hall told the group, because vested interests on all sides of tax reform presumably would fight to protect their respective turfs.
Even so, at least two state legislators at the meeting indicated a guarded interest in the idea.
“It seems very reasonable in times like these to take a look at anything and everything on the table,” said Rep. Marvin Kleeb, an Overland Park Republican and member of the House Taxation Committee.
Kleeb also said he and other lawmakers would need to study many more details of any such plan before deciding its merits.
“One thing that is interesting is that in the research I have done, sales taxes are the only ones that people are at all receptive to changing,” Kleeb said. “Maybe it could get some momentum there.”
“Now may be a difficult time to look at this, with everything we have on our plates already,” said House Majority Leader Ray Merrick, a Stilwell Republican, referring to budget crises state legislators are expecting to deal with when they meet in January.
Specifically, the proposed tax Hall outlined would end what are perceived as double taxes that consumers and investors pay on savings or investment profits. The tax also would broaden a significant portion of the state’s tax base to include virtually all consumers rather than the 1.4 million households that file individual returns now.
Under the plan, end users of all goods and services would pay an 8 percent retail sales tax. Kansans currrently pay generally between 6 percent and 8 percent now, depending on what local sales taxes are added to a basic 5.3 percent state retail tax rate.
Unusually for such plans, Hall’s also would apply the tax to home real estate purchases and rent payments. Including home purchases among the taxable transaction would help keep the rate low enough to remain competitive with neighboring states' sales taxes. His plan also proposes allowing home buyers to pay the sales tax on their home purchases over a 15- or 30-year period, to minimize any distortion the tax might create in local real estate markets.
Spreading those tax payments over those many years also effectively reduces the extra costs that home buyers pay to the same rates that renters pay, he said.
Low income Kansans for whom these sales taxes might seem an unfair burden could claim tax rebates, just as Kansas taxpayers with incomes below $30,300 already do for food sales taxes they pay, Hall said.
Many intermediate business purchases - made to help deliver the required goods and services to the end users - would be exempted from paying the tax to prevent consumer prices from shooting unreasonably higher if interim prices pyramided 8 percent at each step in the production and distribution system.
Some specific tax exclusions would include:
• Purchases that farms and businesses make, including research and development costs, needed to resell their or services to another buyer.
• Money used for savings or investments, though financial services provided to make the investment would be taxed.
• Tuition expenses for higher education.
• Tithes, due or other contributions to qualifed non-profit organizations.
• Services that churches or other non-profits provide at no charge.
For full story please see Wednesday's Times
© 2008 Southwest Times
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