The House Taxation Committee began hearings Tuesday on House Bill 2328. If passed, this bill would expand the state’s sales tax exemptions to include a sales tax holiday for the purchasing of school supplies. The sales tax holiday would occur on the first Thursday in August at 12:01 A.M. and end at midnight on the following Sunday.
Proponents argue that Kansas businesses are losing revenue to Missouri and Oklahoma, who currently already have such a law. Instead of shopping in Kansas, consumers who live on the border of neighboring states cross state lines during these grace periods in order to purchase the tax-free goods. Furthermore, consumers spend on items while there that are not school related, and therefore are sending unnecessary Kansas dollars to other states.
Opponents suggest a number of problems with the bill. The Kansas National Education Association pointed out that although the bill appears to lend itself towards the enablement of low income families, it actually may not help them as anticipated. Presumably low income families are the least able to save up for a tax holiday and are the least able to make these often expensive purchases, while upper income families who can already afford these items would have the greatest ability to take advantage of such a proposition.
I continue to support serious reform for Kansas’ method of issuing tax exemptions. Instead of creating more tax exemptions on a case by case basis with no set standard for qualification, the state should seek to reduce exemptions and broaden the tax base to allow lower rates and more stable revenue. The continual shifting of the tax burden to a smaller and smaller base results in the necessary raising of other tax rates, such as property tax.
The Kansas League of Municipalities also weighed in on the issue. Referring to a study published in 2005 by the Institute on Taxation and Economic Policy called “Talking Taxes,” KLM pointed out that there is evidence suggesting there has been a fair amount of abuse in this regard. The study, part of which took place in Florida, observed that while the tax holiday was in effect, some retailers simply raised the price of the items in question, and perhaps even negated up to 20% of the potential benefits from the sales tax holiday in the form of higher prices.