Sales tax on food would drop to pre-recession levels under the Senate GOP’s latest proposal to lower income tax rates.
But the new plan, presented Wednesday during a series of negotiations, would tax all other goods at just under the 6.3 percent level lawmakers approved in 2010 to stave off drastic cuts to state services as the recession sapped state cash flows. The Senate’s plan would drop that rate to 6.25 percent.
Lawmakers failed, however, to find an agreeable plan as the 89th day of the 90-day legislative session drew to a close and proposed follow-up tax negotiations fizzled out. Republican leaders planned to resume negotiations Thursday morning.
It’s unclear whether the lower sales tax on food will gain enough support. The proposed food sales tax rate, which is the same as Kansans paid before 2010, would apply only to unprepared food – not meals served at restaurants.
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But the return to 5.7 percent sales tax on food would still cause many poor Kansans to pay more than they used to because last year’s tax cut plan repealed the food sales tax rebate that elderly and disabled Kansans used to be able to claim if they made less than $36,700 a year.
“The people who would have realized the rebate are actually going to end up paying more … as a result of this,” said Rep. Julie Menghini, D-Pittsburg, who is the House Democrats’ leader in current tax negotiations.
Sen. Les Donovan, R-Wichita, said the lower food sales tax rate may entice some people who live near the Missouri border to shop at Kansas grocery stores.
“They might decide it’s not worth burning some $4 gasoline to go over there and save a few bucks on groceries,” he said. “They might stay home.”
While lawmakers said the shift could win over some votes, it may also peel some away because it eliminates popular tax deductions over the course of five years, trimming their value by 25 percent next year and increasing to 100 percent by 2018.
The proposal is just the latest attempt by Republicans, who easily outnumber Democrats in the Legislature, to bring in new revenue to prevent huge budget problems caused by the big income tax cuts Gov. Sam Brownback signed into law last year. The new revenue would come from continuing some of the sales tax increase that was slated to expire in July and by getting rid of deductions, except for the charitable contributions deduction.
The Senate’s new plan cuts the lower tax rate from the current 3 percent to 2.9 percent next year and continues to decrease it to 2.5 percent by 2018. The upper rate, paid on income beyond $30,000, would fall from the existing 4.9 percent to 4.8 percent next year and continue to fall to 3.5 percent by 2018.