TOPEKA — A Kansas House committee blessed a $200 million tax reform bill Monday beneficial to corporations and individuals eager to claim pieces of a federal tax windfall and that whittles down the statewide sales tax on food and imposes a sales tax on internet transactions.
The income and food sales tax provisions will cut Kansas' tax obligations, while the internet piece will take a bite out of taxpayers.
Foundation of the legislation was fast-tracked through the Senate in a bid to help multi-national corporations avoid state income tax on at least $100 million in 2018 on repatriation of profits stashed overseas. The cash is flowing back to the United States because Congress passed and President Donald Trump lowered the federal tax on the hoard.
The base bill drafted by the Senate also allowed individual taxpayers — an estimated 18 percent — to claim the new standard deduction on federal income taxes and continue itemizing income tax deductions at the state level.
Rep. Les Mason, a McPherson Republican, resisted calls from GOP colleagues to avoid tinkering with Senate Bill 22. He began by proposing a 1 percentage point reduction in Kansas' 6.5 percent sales tax on food. The state's regressive tax on groceries — last raised in 2015 during the administration of Gov. Sam Brownback — is among the nation's highest.
The committee deadlocked 11-11 on amending the food sales tax until Chairman Steven Johnson, R-Assaria, broke the tie in favor of lowering the rate to 5.5 percent in October.
"I don't like the amendment," said Rep. John Barker, an Abilene Republican opposed but resigned to adjusting the Senate bill. "Sometimes, we have to take a little good with the bad."
On an annual basis, each 1 percentage point reduction in the food sales tax would lower state revenue by $60 million.
Rep. Kathy Wolfe-Moore, a Democrat from Kansas City, Kan., said the Legislature's focus ought to be on cutting the sales tax burden on lower-income Kansans instead of proposing a blanket change permitting lawmakers to check a political box. The sales tax provisions could be removed on the House floor or deleted during House and Senate negotiations on the bill.
"If your goal is just to reduce the sales tax on food, well, then I guess this starts that path," Wolfe-Moore said. "If your goal was ... to make it a less-regressive tax and really help the people that need it, we're probably not making any measurable difference."
Mason's second amendment imposed a state tax on internet sales handled by out-of-state retailers with total gross sales in Kansas of $100,000 in the current or preceding calendar year. The change should be of benefit to bricks-and-mortar businesses operating in Kansas and contribute an estimated $34 million annually to the state treasury, Mason said.
This amendment to the tax code passed 14-8 and was followed by an affirmative vote sending the new version Senate Bill 22 to the House floor.
Rep. Ken Corbet, R-Topeka, said passage of the overall bill would be a rarity because few bills before the committee waded into meaningful tax cuts.
"I think this committee should do what it can to help make this state grow and make it easier not only businesses but individuals to stay here and come here. It seems like whatever money that comes back to this dome never leaves where you want it to go," Corbet said.
The Republican majority's rush to burn through cash will exacerbate long-term budget challenges, said Rep. Henry Helgerson, D-Wichita.
"I'm asking the question of my beloved colleagues, does anybody else have some solutions?" Helgerson said. "What I'm asking people on the other side, is there a way that we can figure out how we do both things? Help our businesses and at the same time not destroy the state budget."