Non-profit groups told legislators Tuesday that rolling back a business tax exemption in order to lower the food sales tax would allow low-income Kansans to eat healthier.
Kansans pay 6.5 percent state sales tax on groceries — the second highest percentage in the nation.
Karen Siebert, advocacy advisor for Harvesters, told the House Taxation Committee that the high tax drives low-income consumers to “cheaper, calorie-dense,” foods that are not healthy.
“Lowering the cost of food would help the most vulnerable among us meet their basic needs,” said Siebert, whose organization represents 300 food assistance facilities in the state.
Siebert’s comments came during a multi-hour hearing on House Bill 2444, a hot-button issue politically because it would end the income tax exemption on “pass-through” business income that is a signature of Gov. Sam Brownback’s 2012 tax changes.
Brownback threatened to veto any attempt to roll back the exemption last year when Rep. Mark Hutton, a Republican from Wichita, floated a bill to do so as part of a state budget fix.
Hutton changed the bill this session to make it a trade for lower grocery taxes. If it passes, the state sales tax on food would drop to 2.6 percent on July 1.
Kansas business owners and lawmakers from both parties lined up to testify for the bill Tuesday, saying the tax exemption was unfair, budget-busting and ineffective in creating jobs.
The Kansas Chamber, National Federation for Independent Business, Kansas Policy Institute and Americans for Prosperity lined up on the other side, urging legislators to keep the exemption.
They said staying the course would improve the state economy.
“We would argue the best economic growth could be achieved by protecting the business tax cuts over reductions in food sales tax,” Kansas Chamber spokesman Eric Stafford said in written testimony, “and continuing efforts to improve efficiencies to allow for further reductions in income taxes.”
Kansas Department of Revenue secretary Nick Jordan also testified against the bill.
Health, anti-poverty and small farming groups joined Siebert in supporting the bill, saying that the state would save money on health care costs by lowering the tax on groceries.
“Food is not a luxury item,” said Ashley Wisner-Jones, state policy manager of KC Healthy Kids. “Kansas food tax is an unfair burden on the poor, particularly on the poor in rural areas.”
“Lowering the cost of food would help the most vulnerable among us meet their basic needs”- Karen Siebert, advocacy advisor for Harvesters
Siebert said 1 in 7 Kansans are considered “food insecure” right now.
Michael Smallwood of the Kansas City Kansas Chamber of Commerce said food cost concerns are particularly acute in Wyandotte County.
“The sales tax on food hits poor and fixed income people in our community the hardest,” Smallwood said. “This is particularly true because we are a border county.”
The sales tax on groceries in Missouri is 1.225 percent.
The committee did not take action on the bill. With the regular session running short, consideration could be relegated to the veto session, when budget balancing will be the top priority.
Some of the bill’s supporters were more interested in rolling back the tax exemption to help shore up the state general fund, rather than lower the food tax.
Rep Gene Suellentrop, a Republican from Wichita, noted that many of them focused their testimony on the benefits that could have on things like road and education funding.
“Are you interested in putting the money back in the SGF to do those things?” Suellentrop said. “Or are you interested in putting it to lowering the sales tax?”
Suellentrop took the rare step of asking the members of the gallery to raise their hands for an informal vote, and the hands for putting the money in the general fund easily outweighed those raised for lowering the grocery tax.
Denis Miller, an accountant from Phillipsburg who supports ending the exemption, said it would be a “foolish move” to use the proceeds to lower the sales tax on food until the state is back on its feet financially.
“As long as the state of Kansas is in such a dire financial state, it seems a poor move to reduce the sales tax on food,” Miller said.