A proposal for a constitutional amendment lowering the state sales tax rate on food is an idea that merits serious consideration.
The Senate tax committee held a hearing last week on a proposal that would lower the state sales tax rate from 6.5 percent to 4 percent in calendar year 2019, then to 2 percent in 2020 and thereafter. The amendment would require a two-thirds vote of the House and Senate before it could be placed on the ballot on November.
Because food consumption is relatively stable regardless of income or the economy, sales taxes on groceries are the most regressive form of taxation. The tax burden increases as income decreases.
State Sen. Tom Holland, D-Baldwin City, is one of the cosponsors of the measure. He noted that Kansans pay one of the highest tax rates on food of any state in the country. In some cities, including Lawrence, residents pay sales taxes of more than 9 percent on food when local sales taxes are included.
“We provide business incentives for businesses to invest,” Holland said. “We need to be providing incentives to families to help support them in raising their kids. The best way we can do it is by making our sales tax, particularly on food, less burdensome.”
The problem, of course, is that state government has come to rely upon revenue from the tax on groceries. Kathleen Smith, of the Kansas Department of Revenue, estimated that reducing the tax on groceries would cost the state $128 million in the first fiscal year and $246.4 million in the second.
Simply put, reducing the sales tax on groceries would require an increase in taxes elsewhere, most likely income taxes. But as Holland noted, the recent federal tax overhaul will generate about $3 billion in savings for Kansans, with most of the savings going to top income earners.
“We need to raise the marginal income tax rate on very wealthy earners in this state,” he said.
As written, the reduction in the sales tax on groceries would apply not only to groceries but also to food sold in restaurants. It would only apply to the state’s sales tax rate, not to sales taxes by local governments.
Lawmakers could approach the change statutorily, but Holland rightly noted that a constitutional amendment would protect the sales tax on groceries from creeping up in the future. Beside, a constitutional amendment would allow Kansans to decide, ultimately, how they should be taxed.
A similar amendment was proposed during the 2017 session but never made it out of committee. Holland is to be commended for pushing the issue again this session — the fairness of sales taxes on groceries is an issue that deserves serious legislative debate.