Kansas should adopt food sales tax amendment

A proposed constitutional amendment would reduce, then eliminate, the sales tax on food in Kansas.

A severe and harsh problem in Kansas is our high sales tax on food. Only 14 states apply sales tax to food purchased at grocery stores for home consumption. Of those states that tax food, Kansas has either the highest rate, or the second-highest rate, depending on a few factors. Now, a resolution introduced in the Kansas Senate would reduce the food sales tax rate in two steps, and then eliminate the tax.

The measure is SCR 1612, titled “Constitutional amendment providing for phase out and complete exemption from sales and use taxation of food and food ingredients.”

The essence of the resolution is that on July 1, 2017, the sales tax on food would fall to four percent. On July 1, 2018 it would fall to two percent. On July 1, 2019 the rate would become zero.

This is a proposed amendment to the Kansas Constitution. To advance it requires passage in both the House and Senate with a two-thirds margin. If that happens, the amendment would appear on a statewide election ballot. If a majority of Kansas voters approve, the constitution then has a new amendment. The governor has no role in the processing of amending the constitution except for expressing approval or opposition and lobbying legislators and voters.

The resolution is sponsored by 12 senators. It requires 27 senators to pass with the required two-thirds margin.

Estimates that reducing the food sales tax rate from the present 6.5 percent to four percent might reduce revenue from $120 million to $150 million.

Kansas sales tax effects by income quintile, three scenarios. Click for larger version.
Kansas sales tax effects by income quintile, three scenarios. Click for larger version.
This is something the state needs to do. The sales tax on food is harmful to low-income families. See Kansas sales tax has disproportionate harmful effects and Wichita sales tax hike would hit low income families hardest. Supporters of a national sales tax, the FairTax, recognize this and compensate for the regressive nature of sales tax by incorporating a “prebate,” a monthly payment to offset the high sales tax on food and other necessities.

It’s true that in Kansas there is the possibility of receiving a food sales tax credit of $125. But this is something that must be applied for when filing an income tax return. Also, the credit is nonrefundable, meaning that applicants must have income tax liability of at least $125 to receive the full credit. Low-income households generally don’t have an income tax liability, meaning the tax credit is not available to them.

When proposing tax cuts, the question usually asked is “how do we pay for the tax cut.” That’s the wrong question. Tax cuts do not have a cost. It’s government that has a cost. Tax cuts simply let people keep more of what is rightfully theirs in the first place. So the proper question is “how will the state trim spending so people keep more of their money, especially low-income families.”

But if the legislature wanted to compensate for the lost revenue of cutting sales taxes on food, here’s something to consider.

The Kansas Department of Transportation receives part of the sales tax revenue. Prior to 2013, 11.2 percent of sales tax revenue was transferred to KDOT. Since then, the figure is 17.1 percent. If we simply changed the allocation back to the pre-2013 level, that would mean an additional 180 million dollars for the state general fund, according to estimates from Kansas Policy Institute. That’s enough to pay for the first round of food sales tax cuts in the proposed amendment.

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