Kansas’ tax reform agenda stretches far beyond food sales tax, one-time cash rebate

GOP-led tax panel seeks constitutional amendment to limit government growth

By: - January 8, 2022 12:00 pm
Gov. Laura Kelly's top tax-reform priority is elimination of the state's 6.5% sales tax on groceries, but the GOP-led Legislature intends to color the Capitol with property, income and sales tax legislation. (Sherman Smith/Kansas Reflector)

Gov. Laura Kelly’s top tax-reform priority is elimination of the state’s 6.5% sales tax on groceries, but the GOP-led Legislature intends to color the Capitol with property, income and sales tax legislation. (Sherman Smith/Kansas Reflector)

TOPEKA — The top tax reform priority of Gov. Laura Kelly is elimination of the state’s 6.5% sales tax on groceries and she’s put a shoulder behind plans for a one-time tax rebate to more than one million residents of the state.

“My administration has taken steps to restore the Kansas economy and that fiscal responsibility has paved the way to provide direct tax relief,” Kelly said. “That relief will come specifically through proposals like axing the food tax and offering a one-time $250 tax rebate for Kansas families.”

Huge cash reserves in the state treasury opened the door to support for lowering the state’s extraordinarily high sales tax on food, but it’s unclear whether the Legislature has an appetite for surrendering $450 million annually to end that revenue source. The governor’s $445 million rebate program could prove politically difficult given the outpouring of ideas for slashing property, income and sales taxation floating around the Capitol.

Senate President Ty Masterson, of Andover, and House Speaker Ron Ryckman, of Olathe, both said they would press hard for tax relief in the 2022 legislative session. However, both viewed Kelly’s rebate as a campaign gimmick.

“While I am open to all ideas to help reduce the tax burden on Kansas families, permanent solutions will be our priority,” Masterson said.

The 90-day legislative session convenes Monday, and election-year politics has turned a spotlight on bread-and-butter tax issues.

The Legislature’s joint House and Senate tax panel recommended credits and exemptions no longer in vogue be stripped from statute books. A bill is coming to create one individual income tax bracket, rather than three, in Kansas. There will be an effort to overhaul energy tax policy, perhaps to the detriment of renewable advocates.

In the House and Senate, lawmakers filed companion bills to provide a sales tax exemption for ranchers or farmers buying materials to rebuild fences destroyed by wildfires. A dozen House members sponsored a bill that would deliver an income tax break to members of the military. Another would require foreclosure auctions ordered by the court to be in-person events in the same county where the property exists.

A bill granting senior citizens a substantial property tax break has generated bipartisan buzz. There is interest in repealing the 1.5 mill property tax funneling money to state universities for building maintenance. Kansas has higher gasoline and cigarette taxes than Missouri and Colorado, but there’s a bill tweaking the state tax on wine.

The Senate is leading the charge for a constitutional amendment aimed at restraining government growth. That could be done by placing caps on revenues or expenditures. In an emergency, the lid could be suspended by a two-thirds vote of the House and Senate and with consent of the governor.

Another suggestion aimed at placing the bulging bureaucracy on a diet: Tie state government employment to the Kansas population.

Sen. Caryn Tyson, a Parker Republican and chair of the Senate’s tax committee, said legislative leadership was prepared to put a constitutional amendment up for debate in the 2022 session. She dismissed skepticism from Wichita Rep. Henry Helgerson, who said the constitutional amendment came with too many complications.

“We need innovation. We need new ideas,” said Tyson, who is seeking the GOP nomination for state treasurer. “I think this is the year.”

Tyson said the state’s heavy reliance on property tax to run government should come to an end. People on limited incomes are making choices to purchase food, buy medicines or pay property taxes, she said.

“We have come to rely on property tax so much that we are stagnant,” Tyson said. “In fact, people and businesses are leaving the state as a result.”

The Legislature is expected to debate a bill exempting Social Security benefits from state income tax. It would cost the state $230 million to $300 million annually to exempt from state taxation all retirement income. A policy question raised by Republicans and Democrats centered on whether it was fair to grant this special-interest tax relief to wealthy retirees.

“I don’t worry about the people making hundreds of thousands of dollars, because they also buy Beamers and Mercedes,” said Rep. Les Mason, a McPherson Republican.

Sen. Mark Steffen, R-Hutchinson, said the state’s attorney general should challenge constitutionality of state law gradually increasing state aid to K-12 public school districts, which are supported by a 20 mill statewide property tax. Inflation triggers in existing law will unsustainably increase financial pressure on the state budget, he said.

It’s not evident how much tax reform the state could afford and how eager legislators and the governor would be for compromise on tax policy. Overall during the 2021 legislative session, only 116 bills became law out of 769 introduced. Kelly vetoed 10, but five were overridden.

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Tim Carpenter
Tim Carpenter

Tim Carpenter has reported on Kansas for 35 years. He covered the Capitol for 16 years at the Topeka Capital-Journal and previously worked for the Lawrence Journal-World and United Press International.