A new wrinkle in the tax debate at the Capitol emerged Monday when Senate President Ty Masterson offered a plan to cut the sales tax on food as an alternative to Democratic Gov. Laura Kelly’s proposal to eliminate the tax immediately.
Masterson came out in support of a new bill that repeals the current law that eliminates the state sales tax on groceries by 2025 and replaces it with ending the sales tax only on healthy foods in 2024.
Appearing before the Senate tax committee on Monday, Masterson pitched the bill that would eliminate the sales tax – state and local – on foods such as fruits and vegetables, meat, poultry, fish, eggs and milk.
It would effectively increase the sales tax on other food items that aren’t considered “healthy” by the legislation. Those items would be taxed at 6.5%.
The Senate president characterized the bill as part of an overall strategy to reduce or eliminate taxes on Social Security benefits and move the state to a flat tax.
“I’m trying to put a tool in the tool box that can get a broader package together,” Masterson said after the hearing on his bill.
“I think the structure needs to be more comprehensive so I’m trying to find a way that works,” Masterson said. “It’s better for the constituents in the end.”
Cutting the sales tax on healthy food is projected to cost the state $403.5 million in fiscal years 2024 and 2025.
Masterson’s proposal is very different from the governor’s plan to eliminate the state sales tax on groceries this year instead of gradually phasing them out.
Last year, the governor signed a bill – called Axe the Food Tax – that called for cutting the state’s 6.5% sales tax on groceries to 4% by Jan. 1, 2023.
The tax would be reduced to 2% in 2024 and then ultimately to zero by 2025.
The governor’s plan would cost the state about $464 million from 2023 to 2025.
A spokesperson for Masterson said late Monday afternoon that he didn’t believe there could be a roughly $60 million difference between the two plans.
Masterson said the governor’s catchphrase for cutting the sales tax on food was a misnomer.
“Axe the tax was a great campaign line,” Masterson said. “But it doesn’t axe the tax on food. It axes the state tax on food.”
Masterson said residents across Kansas are still paying local sales taxes on groceries regardless of the legislation enacted into law last year.
“This narrows the items, but it takes it to true zero,” Masterson said.
Masterson said the bill would bring consistency across the state to sales tax rates.
He said taxpayers would know absolutely what food items would be taxed and what wouldn’t be taxed. There would be no variation from one jurisdiction to another.
The proposal drew opposition from a wide array of groups, including convenience stores, nonalcoholic bottling companies, grocery stores, the state’s chamber of commerce and social service organizations.
Some called the bill a “broken promise to Kansans.”
“By repealing last year’s legislation to eliminate the food sales tax, this bill would be taking money out of a family’s pocket that could be better spent on food,” said Jami Reever, executive director of the Kansas Appleseed Center for Law and Justice.
She said the bill ignored the limited access many Kansans have to healthy foods.
She said one in six Kansans live in a “food desert” where residents don’t have financial resources or transportation to get to the grocery store.
She said about 25% of Wichita’s residents don’t have access to healthy foods.
“Not only does this bill reinstate a regressive sales tax, it takes it one step further and punishes Kansans based on where they live,” she testified.
“This bill would bring harm to your own community members,” she said.
Americans for Prosperity supported the proposal, saying it should be paired with a flat tax proposal.
“A move toward this bill in combination with a flat tax…gives everyday Kansans much more relief,” AFP State Director Elizabeth Patton said in written testimony.
The bill, she said, “creates a better economic development environment than by the proposal to purely eliminate sales tax on food.”
Grocers said the bill would add an administrative burden that would force them to sift through lists of their inventory to identify what foods are “healthy” so they could program their computer system accordingly.
Brianna Johnson, spokesperson for the governor, called on lawmakers to pass Kelly’s plan, which also would eliminate sales taxes on feminine hygiene products.
“Instead of placing additional burdens on local businesses, the Kansas Legislature should pass Gov. Kelly’s plan to immediately axe taxes on groceries, diapers, and feminine hygiene products,” Johnson said.
“We promised Kansans tax relief, and we need to deliver now – without additional delays or red tape,” she said.
The top Senate Democrat found Masterson’s proposal remarkable.
“I never thought I’d see the day that the Senate president would introduce a tax increase that promotes a nanny state for Kansas families,” Dinah Sykes said in a statement.
Derek Hein, representing the Kansas Beverage Association, said the bill would make Kansas the first in the nation to define healthy foods.
He said it was a “dangerous road to go down” because everyone has their own idea about what constitutes healthy food.
Allowing the state to designate grocery items as “good” or “bad,” he said, would created a food code more complicated than the tax code.
“This bill will undeniably increase the sales tax on food that is not listed under the healthy food’s definition,” he said.
