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Sales tax money going down as taxes go up, economist says

The amount of money coming in from sales is going down in Kansas, an economist with the Sandlian Center for Entrepreneurial Government at the Kansas Policy Institute thinks he knows why.

“Local officials seem to be puzzled,” said Michael Austin. “Sales tax receipts, which is the tax on consumer shopping, that seems to be shrinking. Some think it might be tied to economic development incentives. Some think that might be related to online sales, some even mention demographic changes. Very few, I see, have mentioned the elephant in the room, which is that taxes keep rising on Kansans’ income and on their property.”

The idea is that wages haven’t grown enough to allow Kansans to pay the additional taxes without shifting how they spend money.

“Higher taxes on wages and business income, combined with the taxes on the value of your home, that depresses your shopping, the income that you decided that you want to use to spend,” said Austin. “That means, of course, fewer purchased goods and services and that slows down the sales tax growth.”

The sales tax rates themselves can depress spending, as well, especially in Johnson County.

“Overland Park, Olathe, Lenexa, Shawnee, Leawood, all of their sales tax rates are above 9%,” said Austin. “New York City’s sales tax rate is 8.9%. Those shoppers who like to go to JoCo to go to the
Oak Park Mall or to Prairie Fire. They’re collectively paying more.”

All decisions have multiple causes, but Austin just wants to point out that the decisions of government to raise taxes do have an impact on consumer spending.

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