While Washington DC is focused on the IRS tax exempt scandal and Federal tax reform seems to be on hold, the Kansas legislature keeps trying to change the state’s tax structure. On Thursday (May 30th), the Kansas House voted down a proposal to reduce the state sales tax on groceries to 4.9% while everything else would be taxed at 6.3%.
Last year, the Kansas lawmakers drastically changed the state income tax. Tax rates were decreased and standard deductions were increased for some taxpayers. The big change was removing business profits from taxation. To help pay for the tax cuts, the legislature cut many tax credits and deductions including the Food Sales Tax Refund. Kansas is one of the few states that adds sales tax to groceries. The Food Sales Tax Refund helped offset part of the burden of the sales tax on the lower income elderly, families with children and the disabled.
The latest proposal would reduce the sales tax on food to 4.9% while everything else would be taxed at 6.3%. The bill seemed to have support from the Kansas Senate and Governor Brownback but was defeated in the House by a 94-18 vote. The big issue is not the lower food rate but the 6.3% for everything else. The current state sales tax is 6.3% but that is scheduled to decrease to 5.7% in August. The Governor has been fighting to keep the higher rate to help pay for the income tax cuts passed last year and prevent a budget shortfall in the future. However, too many of the legislators do not want to explain any tax increase to their constituents back home.
The deadlock on the sales tax has forced a hold on the passage of a budget for the next two years. The new budget should go into effect in July of this year. The pressure is on state lawmakers because they have already gone over their 90 day legislative session. They are now up to day 97 with no true end in sight. And they are adding to any deficit with the additional cost of $35, 000 to $45,000 a day they stay in session.
It seems that the Kansas Legislature has taken a page from Congress’s last minute tax deal in January and is waiting until they are at their Fiscal Cliff to set the state’s budget and the taxes that will pay for it. Not a good example to follow.