The Kansas Senate on Thursday moved legislation to implement a flat income tax for all taxpayers and voted to eliminate all state and local taxes on food sales next year.
The House will take final votes on both bills later Thursday night before they move to the House.
The flat tax proposal has been a priority of Andover Republican Kansas Senate President Ty Masterson since the beginning of the legislative session. He initially proposed paying for the lost revenue from the flat tax with an increase in the tax on the sales of unhealthy foods.
But lawmakers voted on the Senate floor to amend his bill to also eliminate the sales tax on all food.
Before the debate Masterson said that if the amendment passes, it would not scuttle the state’s ability to move to a flat tax, but it would change the look of the eventual policy.
“You’d have to go to a higher rate to make it work,” Masterson said before the debate. In the end he supported the amendment.
Last year, Democratic Gov. Laura Kelly campaigned for the immediate elimination of the food sales tax. Speaking to reporters Thursday, she criticized Masterson’s original plan to raise taxes on unhealthy food. She said the flat tax mirrored tax decisions made by former Republican Gov. Sam Brownback, whom she has consistently criticized.
“When the Brownback Tax Experiment was started, we actually raised sales tax to pay for the Brownback Tax Experiment, which was a significant reduction in income tax,” Kelly said. “So you’ll find those numbers very similar, where you’re cutting income taxes for the top 20 percent and you’re raising taxes on everyone else in a way that hits those who have less more.”
The two main packages came alongside a number of other tax policies, including tax credits for crisis pregnancy centers and grants for private schools, and the elimination of income tax on retirement benefits.
The flat tax measure would set the income tax for all Kansans at 4.75%. All income less than $5,225 for individuals and $10,450 for married couples would be non-taxable. The Kansas Department of Revenue estimates that the flat tax will reduce state revenues by approximately $570 million annually once it is fully implemented.
Supporters of the bill touted it as a way to simplify the Kansas tax code while providing tax relief to all Kansans. The move, they argue, would help grow the state’s economy in the long run.
“A single-rate flat tax would help steer us in the right direction,” said Senator Caryn Tyson, a Parker Republican.
But the bill would provide far more tax breaks to higher incomes than low-income Kansans.
According to the Kansas Department of Revenue, Kansas’s lowest earners would save about $42 a year in taxes, while the highest earners would save more than $5,000. The average Kansas taxpayer, the department said, would save about $338 a year.
“All of this only exacerbates the gap between the wealthiest in our state and everyone else,” said Senator Tom Holland, a Democrat from Baldwin City.
A bipartisan group of senators voted on Thursday to advance a separate bill to eliminate the state and local food sales tax effective January 1 of next year.
Currently, the state’s food sales tax is expected to be completely eliminated in 2025, while locals set their own rates. Kelly only advocated eliminating the state tax. Proponents of the Senate bill said eliminating the local tax would eliminate the confusion born of variable rates.
“The people who pay this onerous tax on food don’t know where it comes from, they just know it’s a cost,” said Senator David Haley, a Democrat from Kansas City.
Senators from both parties, however, feared the policy would cause serious damage to local government budgets by removing an important source of revenue.
“If you’re going to bring it down to zero, I wonder where each of these places, your cities, malls are going to get this other revenue,” said Sen. Ron Ryckman, a Republican from Meade. “I don’t think as a state we should take away that tax authority.”
Congressman Mike Peterson, a Republican from Wichita, said an additional policy to close the budget gap for local governments could be passed later this year.
The exact policies are likely to change as they move into the Kansas House. Rep. Adam Smith, a Westkan Republican who chairs the House Taxation Committee, said there is some interest in cutting the food sales tax to zero and pairing it with a flat tax in the hope that Kelly sign it.
He said he was working on his version of the flat tax proposal.
“I’m trying to minimize the tax note,” Smith said. He added that he is looking at a rate of 5.15%.
Other tax bills
Lawmakers have also intervened on tax relief and credits for various specialized groups.
The Senate has moved a bill to eliminate income taxes on all retirement benefits, a plan promoted by former Kansas Attorney General Derek Schmidt in his failed run for governor.
While Kelly supported reducing taxes on Social Security, he criticized any move to eliminate taxes on all retirement benefits as irresponsible.
The House also introduced separate bills creating tax credits for donations to abortion crisis pregnancy centers and expanding an existing tax credit scholarship program for private schools.
The Kansas Tax Credit Scholarship program has steadily expanded over the years. The latest update allows donors to request a credit of 100% of their donation instead of 70% and significantly expands student eligibility for the scholarship.
The move is part of a larger push within Kansas to create more opportunities for families to choose to transfer students from public to private schools using state dollars. A separate bill in the House creates education savings accounts for all Kansas families, allowing them to use money the state would spend on their children’s private education in a public school.
Jonathan Shortan of The Star contributed to this report.