TOPEKA — A pair of bills aimed at eliminating the food sales tax on food and groceries in Kansas will help reduce rising food insecurity and aid families in getting food on the table, supporters say.
House Bill 2484 would exempt food and food ingredients, including products sold at restaurants, from state retail sales and compensation use tax beginning Jan. 1, 2023. The bill would not include alcoholic beverages or tobacco.
The second measure under consideration Tuesday, House Bill 2487, would exempt Kansans beginning July 1. The measure excludes prepared food from the exemption, unlike the first bill, and provides an exemption for sales of farm products sold at farmers’ markets.
Haley Kottler, thriving campaign director for Kansas Appleseed, said COVID-19 has exacerbated many food insecurity issues Kansas families already faced. She said the average family in need would notice savings of about $500 a year through either measure.
“If we want to see Kansas thrive, we need to address the rise in food insecurity any way that we can,” Kottler told legislators on the House Taxation Committee, led by Rep. Adam Smith, R-Weskan. “A 0% sales tax rate food and food ingredient policy solution will directly help all Kansans experiencing hunger and those who are not, while benefiting the Kansas economy.”
The renewed initiative to cut the food sales tax comes amid a budget surplus and after Gov, Laura Kelly and Attorney General Derek Schmidt each proposed either elimination or reduction of the tax. The governor has indicated she would sign the measure once it reaches her desk, if it is a clean bill without other tax breaks.
In 2019, the governor vetoed a pair of bills that would have gradually lowered sales tax down because they tied the measure to income tax breaks Kelly regarded as fiscally irresponsible.
The first proposal, House Bill 2484, would reduce state revenues by $319.8 million in 2023, $782.0 million in 2024 and $796.9 million in FY 2025, according to estimates from the Department of Revenue. The department estimated House Bill 2487 to carry a higher fiscal impact in the first year before leveling off, with $442.9 million in reduced revenue for 2023, $492.2 million in 2024 and $501.6 million in 2025.
Both plans would repeal the state’s non-refundable food tax credit available to certain Kansas residents with a qualifying income of less than $30,615. Revenue estimates suggest repealing the credit would save $10.3 million each year.
John Jenks, public policy director for The Greater Kansas City Chamber of Commerce, said Kansans are feeling the weight of one of the highest sales tax rates in the country and deserve relief.
“The Kansans that feel the greatest impact on this type of tax are often lower-income and underserved, as sales taxes, and especially a tax on food and groceries, is a regressive tax that disproportionately affects lower-income citizens,” Jenks said. “By reducing and eventually eliminating the state sales tax on food and groceries, the state of Kansas can help put money back in the pockets of Kansans to spend on other things and services throughout the state.”
While the KC Chamber approved of the goal, it urged a phased-in approach to be mindful of how quickly the state’s budget surplus can disappear and to allow all stakeholders time to adapt.
One notable difference between the two measures is the effect on local sales tax. While House Bill 2484 would not change local finances, the inclusion of a farmers market sales tax exemption in House Bill 2487 would decrease local sales tax revenue.
Still, the Kansas Association of Counties indicated that eliminating the state sales tax on food could increase local sales tax revenues used in part to finance local governments, especially in border counties and communities where many will cross state lines for cheaper groceries. Jay Hall, deputy director for the association, spoke in support of 2484 because it leaves the local portion of the sales tax untouched.
“We ask that the committee not also reduce the local portion of the tax because counties depend on that revenue,” Hall said. “If we were to reduce those sales taxes for the local portion, which would essentially shift that tax burden to the property tax.”
