Kansas lawmakers raised the state sales tax on Friday to help balance the budget and cover a projected $400 million deficit in the wake of three years of income tax cuts pushed by Governor Sam Brownback.
The increase in the sales tax to 6.50 percent, from the current 6.15 percent, would raise $400 million in revenue. Taxes on cigarettes would increase by 50 cents per pack to $1.29.
Brownback, a Republican, praised the bill in a statement shortly after it passed but stopped short of saying he will sign it. The governor on Thursday threatened to make steep spending cuts on Monday if lawmakers did not pass the budget after meeting for nearly three weeks past their usual adjournment.
"This bill keeps the state on a path of economic growth, creating well-paying jobs that benefit all Kansans," said Brownback. "It continues our transition from taxes on productivity to consumption-based taxes and provides a mechanism for reducing income tax rates for all our citizens."
The Kansas Senate passed the bill 21-19 and the Kansas House endorsed the bill 63-44, online records show.
The bill funds state spending for the fiscal year that begins July 1.
Brownback and the Republican-dominated Senate and House passed legislation three years ago slashing corporate and other income taxes to help the state compete with bordering Missouri and other states for business development and jobs.
The cuts left the state unable to meets its expenses, requiring either more tax increases or sharp spending cuts. Brownback has defended the income tax cuts and he proposed the sales tax hike two weeks ago.
A number of states have sales tax rates higher than Kansas' new rate. The Tax Foundation research group says 45 states collect statewide sales taxes, ranging from 2.9 percent in Colorado to 7.5 percent in California. Indiana, Mississippi, New Jersey, Rhode Island and Tennessee all have 7 percent sales tax, and four more states have rates between 6.5 percent and 6.875 percent.
(Reporting by Kevin Murphy; Editing by Fiona Ortiz and Lisa Shumaker)