A tax-policy expert and a cabinet secretary are urging state lawmakers to take back or suspend some of the tax breaks they’ve handed out in recent years.
“In a time of financial crisis, you don’t give away your revenue,” Kansas Department of Revenue Secretary Joan Wagnon said Wednesday.
Photo by Dave Ranney
Kansas Department of Revenue Secretary Joan Wagnon addresses a Wednesday forum on tax exemptions cuts in social service spending. Wagnon said some exemptions should be repealed. The forum was hosted by the Statewide Independent Living Council of Kansas.
Wagnon was addressing those at a forum at Washburn Law School sponsored by the Statewide Independent Living Council of Kansas, a group that lobbies for the disabled.
Wagnon noted that since 1995, tax exemptions have diverted $10.9 billion dollars from the state treasury.
She called for a thorough review of the state’s tax exemptions, credits, and exclusions.
It’s shortsighted, she said, to cut social service budgets while, at the same, choosing not to tax haircuts, tanning sessions and manicures.
Wagnon said lifting the state’s sales-tax exemption on these and similar “personal services” would generate about $8.9 million a year.
Other exemptions, she said, would generate considerably more.
Earlier this month, budget officials announced the state would have to cut spending by at least $258.8 million by the end of the fiscal year to offset a projected 4.2 percent drop in revenue. The fiscal year ends June 30.
The state constitution requires a balanced budget.
Gov. Mark Parkinson is expected to announce next week his plan for bringing the budget back in balance.
Brad Borden, a tax-policy professor at the law school, also addressed the forum. He said many of the state’s tax exemptions are ill-conceived and outdated.
Male sexual enhancement drugs, for example, are not subject to sales tax because they’re considered prescription drugs.
It doesn’t make a lot of sense, Borden said, for a young couple to pay sales tax on baby formula, diapers, food and clothing for their children while a Viagra user does not.
“The broad exemption for prescription drugs appears to be unfair in this and many other comparisons,” Borden said. “It deserves close scrutiny”
Tax breaks, he said, should be viewed as subsidies because they result in less money reaching the state treasury and leave money with those receiving the breaks.
Agriculture, he said, is a significant part of the state’s economy and few question tax subsidies for farmers. But is it fair, he asked, that farmers are allowed to buy equipment tax-free while others — plumbers, carpenters, and electricians, for example — are not?
“Thus, the state subsidizes famers,” Borden said, “but it does not subsidize others who are working to make a living.”
Wagnon also called for a review of the tax-exempt status of nonprofit organizations.
She cited Wayside Waifs, a Kansas City, Mo.-based animal shelter that hosts tax-free fundraising events in Kansas and, afterwards, spends the proceeds in Missouri.
Extending the sales tax to all nonprofit organizations would generate more that $200 million a year, she said.
About 50 people attended the 90-minute discussion.
Wagnon, a former state representative and former mayor of Topeka, urged the group to back federal legislation for an across-the-board tax on Internet sales. For Kansas, she said, such a tax would generate more than $260 million a year.
She also said she will propose a three-year moratorium on new tax exemptions and credits.
“We have to put a stop to this,” she said, noting that “five or six” bills proposing additional tax breaks will be heard during the 2010 legislative session.
Shannon Jones, director of the Statewide Independent Living Council of Kansas, said the group hosted the forum in hopes of offsetting calls for cuts in state spending.
“We just can’t take any more cuts,” she said.
Today, she said, more than 1,500 adults with physical disabilities are on the state’s waiting list for in-home services.
More than 2,000 people — adults, mostly — with developmental disabilities are on a similar waiting list.
The Department on Aging does not have a waiting list for in-home services for the frail elderly but has warned that if its budget is cut, a waiting list is likely.
“There’s no more meat on the bone to cut,” Jones said.
A video of the proceedings is available on the Web site www.thekansastruthis.com.
-Dave Ranney is a staff writer for KHI News Service, which specializes in coverage of health issues facing Kansans. He can be reached at dranney@khi.org or at 785-233-5443, ext. 128.