Category: Gov. Laura Kelly

Deal costs state $90M annually — far less than original $500M wish list

by Tim Carpenter, Kansas Reflector

Topeka — Rep. Adam Smith emphasized the tax reform bill negotiated by a half-dozen House and Senate members started as an extravagant wish list that would have drained off more than $500 million in annual state revenue.

“We did a lot in committee trying to pare this down,” said Rep. Smith, the Weskan Republican and chairman of the House Taxation Committee. “When all the requests and considerations were put in there, it was close to — I’m going to estimate it — close to $500 million to $600 million. We were trying to be fiscally responsible and look at the overall picture.”

Still, the bundle of tax policy changes the House-Senate conference committee wrapped into House Bill 2239 sent a chill down the spine of Rep. Jim Gartner, D-Topeka. He’s not keen to craft a mega-bill drawn from an assortment of other bills, because the tactic usually meant Republicans were trying to force reluctant legislators to hold their noses and vote for a deal.

“Do you know how many bills are in this one bill?” Rep. Gartner asked.

“Do you really want to know?” said Rep. Smith, a bit sheepish about answering. “There are provisions, if I counted it right, of 29 different bills.”

“That has to be a record for a tax bill,” Rep. Gartner said.

The House, with Reps. Gartner and Smith in the affirmative, voted 103-10 to adopt the compromise bill cleaving $90 million a year from tax revenue to the state. A significant chunk of that cut was aimed at property taxpayers assessed 20 mills for support of K-12 public education. Under current law, the first $20,000 of valuation is exempt from the assessment. The bill would double that exemption to $40,000, which would result in taxpayers retaining an estimated $42 million per year.

More work to do

The Senate was more appreciative of the deal and approved the bill 39-0. That sent it last week to Gov. Laura Kelly, who could sign it, veto it or let it become law after 10 days without her signature. A veto could be considered when the Legislature returns April 25.

Sen. Caryn Tyson, a Parker Republican campaigning for the GOP nomination for state treasurer, said she was disappointed the Legislature didn’t take up other tax bills waiting in the wings.

That to-do list includes House Bill 2597 offering compensation to certain businesses forced to close or modify operations early in the COVID-19 pandemic. Another measure, House Bill 2237, contains tax credits to spur rural housing construction in counties with less than 75,000 residents.

“We have had a surplus of over $3 billion and we are not making a priority to pass this tax money back to the Kansas taxpayers,” said Sen. Tyson, who chairs the Senate Assessment and Taxation Committee. “I am extremely disappointed. Politics should not get in the way of providing for Kansas citizens, especially in this economy. I pray we will make Kansas taxpayers a priority.”

The tax reform idea capturing attention of average Kansans was deposited in House Bill 2106, which also wasn’t acted upon before the Legislature adjourned for a three-week break. The bill would phase out the state’s 6.5% sales tax on groceries over a three-year period. The state rate would drop to 4% on Jan. 1, 2% on Jan. 1, 2024, and zero on Jan. 1, 2025. City and county sales tax rates wouldn’t be changed.

Or, just repeal it

Gov. Kelly, a Democrat, has continued to campaign for elimination of the state’s 6.5% sales tax on groceries. It’s been at that level since 2015 when former Republican Gov. Sam Brownback signed legislation raising the state sales tax from 6.15% to 6.5% to bolster the state treasury after aggressive income tax cuts threw the state into a financial quagmire.

Brownback’s income tax cuts were mostly repealed in 2017, but the state’s tax on food remains among the nation’s highest.

In a statement, Gov. Kelly said the state could afford to delete the state’s portion of sales tax on groceries because state government tax receipts “continued their positive pattern.” In March, state revenue from individual and corporate income taxes, retail sales taxes and other sources totaled $680 million. That was $80 million or 13% more than the projection for March based on estimates of fiscal analysts in November.

“These collection numbers demonstrate the ability to axe the food tax, eliminating the state’s sales tax on groceries on July 1, which provides immediate relief to all Kansans,” said Gov. Kelly, who is seeking re-election. “Due to the state’s sales tax on groceries and pandemic-induced inflation, Kansans continue to pay some of the highest grocery prices in the nation.”

Attorney General Derek Schmidt, a Republican campaigning for the gubernatorial nomination, also embraced exclusion of groceries from the state sales tax. The pending food sales tax legislation and proposals by Gov. Kelly and Schmidt wouldn’t alter city or county sales tax rates.

Kansas Reflector stories, www.kansasreflector.com, may be republished online or in print under Creative Commons license CC BY-NC-ND 4.0.
See more at https://kansasreflector.com/2022/04/05/kansas-tax-reform-bundle-sent-kelly-amassed-from-shards-of-29-different-bills/.

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.

Kansas Reflector stories, www.kansasreflector.com, may be republished online or in print under Creative Commons license CC BY-NC-ND 4.0.
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/.