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In early November, Gov. Laura Kelly announced a major initiative: “Axe the Food Tax.” The plan would eliminate the state sales tax on groceries.
Efforts to squash or reduce this 6.5% tax on food items have been ongoing since at least 2015. But with the opposing parties both signaling their support for removing the tax, the upcoming 2022 legislative session could be the one that clinches the change.
Kansas Attorney General Derek Schmidt, a Republican running for governor next year, has also signaled his support for eliminating or reducing the food tax.
But why does this matter, and what does it mean for Sedgwick County? The Wichita Beacon compiled a primer about the food tax and what getting rid of it could mean for Wichita.
- What is the food tax?
- Do most states tax groceries?
- Why is the food tax called a regressive tax?
- How would getting rid of the food tax impact the state budget?
- How would getting rid of the food tax impact Kansans?
- How would removing the food tax impact Sedgwick County?
- How would removing the food tax impact the city of Wichita?
- What are the next steps?
Counties and cities in Kansas also have the option of imposing a local sales tax. Sedgwick County imposes a 1 percent sales tax on retail sales, which includes food items. Kelly and Schmidt want to change the state sales tax on food, not the local ones.
“Local sales taxes will remain to the discretion of local communities and voters,” Reeves Oyster, a spokesperson for Kelly, wrote in an email to The Beacon.
Only 13 of the 45 states with a sales tax impose that sales tax on groceries, according to Center on Budget and Policy Priorities.
Of those, only Mississippi has a higher tax than Kansas, at 7%.
Why is the food tax called a regressive tax?
The tax on groceries is widely known as a regressive tax — a tax that decreases, as a percentage of a person’s total income, as their income increases.
Studies have found that lower-income families spend a higher percentage of their income on groceries. This means they pay a higher percentage of their income to sales taxes on food.
One study commissioned by the KC Healthy Kids, a food advocacy nonprofit based in Kansas City, Kan., found that the lowest-income households pay anywhere from 2.7 percent to 8.4 percent more of their income in taxes on groceries than a household in the highest income level.
“The Kansas food sales tax — the second-highest food sales tax in the nation — has always created a regressive, undue burden for working Kansas families who spend hundreds of dollars each year just in taxes on their groceries,” Haley Kottler, Thriving Campaign director for Kansas Appleseed, said in a press release about Kelly’s “Axe the Food Tax” plan.
How would getting rid of the food tax impact the state budget?
Kelly’s office estimates that eliminating the food tax would cost state coffers about $450 million a year. That’s about 5.6% of the total expenditures the state is approved to make in the 2022 fiscal year. Sales tax on food makes up about 15% of all sales tax the state collects, according to a 2021 fiscal note.
But the state is likely to collect nearly $2.89 billion more in tax revenue than it expects to spend in the current fiscal year, which ends in July. The year after that, the surplus goes up to $3.77 billion.
These excess dollars make eliminating the food tax feasible, according to Kelly.
The state’s general fund receives 83.86% of the retail sales tax revenues, and the state highway fund receives the remaining revenue.
How would getting rid of the food tax impact Kansans?
According to Kelly, a Kansas family of four would save, on average, over $500 on their grocery bill every year.
Additionally, with the removal of the food tax, the food sales tax credit would be eliminated. The $125 tax credit for exemptions claimed on federal income tax returns is based on income, age and disability status.
How would removing the food tax impact Sedgwick County?
Removing the sales tax on food could impact Sedgwick County in two ways.
First, decreasing the state budget by about $450 million could ripple down to counties.
“Any time there is a change in state revenue, that can have an effect on counties because counties perform so many administrative services for state government, many of which are paid for through the counties supplementing the funding from the state,” Kimberly Qualls, education and communications director for the Kansas Association of Counties, wrote in an email to The Beacon.
The second impact, according to Sedgwick County Chief Financial Officer Lindsay Poe Rousseau, is how counties would remove the state sales tax on food items while keeping the local one in place.
“I have concerns about how that would work in execution for businesses that sell both food and non-food items, like a small convenience store,” Poe Rousseau said in an email to The Beacon. “A point-of-sale system would need to be able to distinguish between food items and non-food items – and apply the correct sales tax rate to each one.”
If the county did eliminate its local 1% sales tax on food items, it would likely lose about $4.3 million in revenue, county officials estimate, and add to the savings Sedgwick County residents would see with the removal of the state sales tax on food.
How would removing the food tax impact the city of Wichita?
Both Erik Sartorius, executive director of the League of Kansas Municipalities, and Megan Lovely, a spokesperson for the city of Wichita, wrote in emails that it is too early to tell what impact eliminating the food tax could have on cities, particularly Wichita.
Eleven percent of the city’s 2022-23 adopted budget comes from sales taxes.
If 15% of these taxes come from food sales, as the state Department of Revenue estimates, the city would lose $10.7 million in sales taxes.
In the city of Wichita, half of sales tax revenue goes to the general fund and the other half to financing highway and road projects.
What are the next steps?
Kelly said she will introduce a bill in the upcoming legislative session, which begins Jan. 10.
“A bill to Axe the Food Tax is in the process of being written,” Oyster wrote. “It will be introduced as soon as possible during the 2022 legislative session.”