Committee rejects proposed amendments speeding cuts to food tax
by Tim Carpenter, Kansas Reflector
Topeka — The Kansas House tax committee Tuesday approved legislation that would shrink the overall statewide sales tax on general purchases to 6.3% and nearly slice in half the state sales tax on groceries to 3.5% in a move that would promptly lower annual revenue by $336 million.
The bill recommended by the House Taxation Committee deviated from Democratic Gov. Laura Kelly’s proposal to concentrate a portion of the state’s budget surplus on repeal of the state sales tax on food purchases. Instead, the Republican-led committee broadened the effort by chipping away at the overall 6.5% state sales tax in place since 2015.
The general sales tax rate under the House bill would be cut 0.2% and the sales tax on food and food ingredients would fall by 3%. If the state’s budget stabilization fund had a balance of more than $100 million on July 1, the bill would allow the state food sales tax to fall 1.2% the following Jan. 1.
The legislation wouldn’t alter local city or county sales tax rates, but House Bill 2711 would create a refundable food sales tax credit for benefit of low-income Kansans. The bill would hold harmless the state’s highway trust fund.
The committee rejected a Democratic member’s amendment that would have pushed the food sales tax down to 2% as well as a Republican lawmaker’s amendment that would have eliminated the sales tax on groceries and food sold at restaurants.
Rep. Adam Smith, a Weskan Republican and chairman of the House tax panel, said a measured approach to diminishing sales taxes in Kansas was wise given Kansas’ recent history on tax policy. In 2012, then-Gov. Sam Brownback signed a bill aggressively reducing income tax rates. That led to extreme revenue shortfalls, the 2015 surge in the statewide sales tax and repeal of Brownback’s income tax experiment in 2017.
Smith said earlier attempts to lower sales tax rates were sidestepped because of the budget impact. The prudent path is to gradually lower rates to avoid a budget collapse several years down the road, he said.
“Reducing the sales tax on food has been an issue every year I’ve been down here and long before that,” Smith said. “It’s a very expensive undertaking. I would not disagree that we have the money to pay for going all the way to zero.”
The Kansas Department of Revenue estimated the House bill’s hit on the treasury would climb over a four-year period from $336 million in fiscal year 2023, to $431 million in fiscal 2024, to $517 million in fiscal 2025 and to $605 million in fiscal 2026.
Rep. Henry Helgerson, D-Wichita, said he was concerned with the rush by some lawmakers to spend an anticipated budget surplus of about $3 billion. The governor, for example, proposed Tuesday the expenditure of $50 million on low-income housing. He said the House and Senate budget committees were working on their own spending strategies that could defy “rationality.”
“If you don’t take it for tax reductions, it’s going to be spent,” Helgerson said.
The House committee rejected an amendment by Rep. Jim Gardner, D-Topeka, that would have tabled the 0.2% overall reduction in the sales tax and chopped the sales tax on groceries to 2%. He said the idea was to work toward elimination of the state’s food sales tax in two years, he said.
Gardner said the 3.5% food sales tax didn’t make Kansas grocery stores competitive with neighboring states of Nebraska and Colorado, which don’t collect sales tax on grocery purchases.
Rep. Ken Corbet, R-Topeka, fell short with an amendment that would end the state’s sales tax on groceries and drop the overall state sales tax rate to 6.3% in July. His amendment also would have applied the lower state sales tax rate to prepared food sold at restaurants.
“We don’t do hardly anything here to promote business,” Corbet said. “I’ll put a little bit of money in everybody’s pocket. It makes your constituents very happy.”
The House and Senate as well as the governor are expected to wrestle through the process of moderating the state sales tax during the current legislative session. Kelly and all 125 members of the House are up for re-election in November.
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See more at https://kansasreflector.com/2022/03/15/house-panel-votes-to-clip-states-6-5-sales-tax-to-3-5-on-food-6-3-on-other-purchases/.
