LAWRENCE — Vashti Winterburg urged Kansas politicians to avoid experimental tax policy debacles designed to appease wealthy interests and instead focus on restoring a program offering hundreds of thousands of lower-income people a modest break on food sales tax.
Winterburg said the annual food sales tax rebate was abandoned during the administration of Gov. Sam Brownback to help pay for elimination of income tax on more than 330,000 business owners and reduction of income tax rates for individuals. Turning back the clock on the food tax rebate, she said, would benefit her friend Paul, who gets by on disability benefits, food stamps and subsidized housing.
"Prior to the Brownback plan," she said, "Paul would get an annual refund of about $200 a year for the amount he paid in sales tax on groceries. For most of us, $200 isn't a lot of money. However, $200 is a lot of money for people like Paul."
There is growing interest in Winterburg's suggestion, in part because Kansas imposes a 6.5% sales tax on food and city or county sales taxes on groceries push the total over 10% in some communities. In terms of sales tax on food, Kansas' neighboring states range from no tax in Nebraska and Colorado to a rate of 4.5% in Oklahoma. In Missouri, the rate stands at 1.2%.
"Food is not a luxury item," said Beth Low-Smith, who works with KC Healthy Kids. "Kansas’ state sales tax on food puts an unfair burden on low-income families, hurts rural grocers and their employees and drives shoppers across state lines."
There is a bounty of tax reform ideas awaiting the Republican-led Legislature and Democratic Gov. Laura Kelly when the 2020 session convenes Jan. 13 in Topeka. These public officials often wrestle with philosophical implications of change and questions about fairness of reform while debating the financial toll of stripping away property, income and sales tax revenue.
Senate and House GOP leaders are expected to renew their call for income tax reform beneficial to multinational corporations and well-to-do individuals that was vetoed by Kelly during the 2019 session.
Because of tax changes signed by President Donald Trump in 2017, big companies can return foreign income to the United States at a lower federal tax rate. Kansas companies operating internationally asked the state not to tax those profits. In addition, current state law forbids individual filers from taking the new standard deduction on federal income taxes while continuing to itemize deductions on state tax forms.
The Kansas Chamber worked with the nonprofit Tax Foundation to produce a 150-page report on options for reforming Kansas tax law in the 2020 session. The list included removal of international income from the state income tax base and allowing individuals to itemize tax deductions even if they take the standard deduction on federal tax forms.
"We are excited by the prospect that, a few years hence, 'Kansas' will cease to be a word of warning and instead be a word that connotes reform and renewal," said Michael Lucci, a Tax Foundation vice president. "It's time to turn the page on the debates of the past decade and chart a new course."
At the same time, Kelly said she was supportive of recommendations to the Legislature from her bipartisan advisory council established to conduct an 18-month study of tax issues.
"What they have done is come up with some sort of low-hanging fruit," Kelly said. "Things that we could go after right now that we might actually be able to afford to do and then spend the next year looking deeper and coming up with, probably, a staged reform of tax structure."
The council embraced resumption of the food sales tax credit. Members of the panel also said the state should rekindle the program dropped in 2003 that could provide a state subsidy of perhaps $100 million annually to help local government curtail property taxes.
In addition, the council suggested application of sales tax to digital transactions and subscription services as well as sales by out-of-state retailers facilitated by third-party companies, such as Amazon. The governor's tax advisers recommended exempting local government road and bridge repair projects from a state-mandated lid on property tax increases because the limit hindered development.
Michael Austin, director of the Center for Entrepreneurial Government at the Kansas Policy Institute, said pressure from the Kelly administration to increase tax revenue was tied to plans to boost state spending. He said Kansas should reallocate money from wasteful programs rather than raise taxes.
"Optimal tax policy means to lower the entire income, sales and property tax rate," Austin said.
Sister Therese Bangert, representing Sisters of Charity of Leavenworth, said lawmakers should commit to the state earned income tax credit championed by the President Ronald Reagan as the best anti-poverty, pro-family reform.
The Legislature should deepen the state’s resolve to maintain a full home mortgage interest deduction on state income taxes, said Patrick Vogelsberg, of the Kansas Association of Realtors. The 100% deduction was slashed in 2012 to 70% and frozen at 50% in 2015. In 2017, legislation repealing much of Brownback’s tax reform program launched in 2012 included a provision restoring the mortgage interest deduction to 100% by 2020.
"Tax benefits specifically for home ownership should be prioritized," Vogelsberg said. "The state of Kansas should be encouraging home ownership rather than making home ownership harder."