Kansas Senate approves flat income tax, total elimination of food sales tax

The Kansas Senate approved legislation Thursday to implement flat income tax for all taxpayers and voted to eliminate all state and local sales taxes on food next year.

The chamber voted 22-17 to approve the 4.75% flat income tax and 22-16 to eliminate the food sales tax.

The flat tax proposal has been a priority of Kansas Senate President Ty Masterson, an Andover Republican, since the beginning of the legislative session. He had originally proposed paying for lost revenue from the flat tax with an increase on sales tax for unhealthy food.

But lawmakers voted on the Senate floor to amend his bill to also eliminate sales tax on all food.

Prior to the debate Masterson said that if the amendment went through it wouldn’t sink the state’s ability to move to a flat tax but would change what the final policy would look like.

“You’d have to go to a higher rate to make it work,” Masterson said before the debate. He ultimately supported the amendment.

Democratic Gov. Laura Kelly campaigned on the immediate elimination of the food sales tax last year. Speaking to reporters, Thursday, she criticized Masterson’s original plan to increase tax on unhealthy food. She said the flat tax mirrored the tax decisions made by former Republican Gov. Sam Brownback, who she has consistently criticized.

“When the Brownback tax experiment was initiated, we actually raised sales tax in order to pay for the Brownback tax experiment, which was a significant reduction in income tax,” Kelly said. “So you will find those numbers to look very much alike, where you are cutting income taxes for the top 20% and you’re raising taxes on everybody else in a way that hits those who have the least the most.”

The two major packages came alongside a string of other tax policies including tax credits for crisis pregnancy centers and private school scholarships and eliminating income tax on retirement benefits.

The flat tax measure would set income tax for all Kansans at 4.75%. All income less than $5,225 for individuals and $10,450 for married couples would not be taxable. The Kansas Department of Revenue estimates the flat tax bill would reduce state revenues by around $570 million annually once it is fully implemented.

Advocates of the bill have touted it as a way to simplify Kansas’ tax code while providing tax relief to all Kansans. The move, they argue, would help grow the state’s economy in the long term.

“A single rate tax flat tax would help take us in the right direction,” said Sen. Caryn Tyson, a Parker Republican.

But the bill would provide far more tax relief to high earners over low income Kansans.

According to the Kansas Department of Revenue, Kansas’ lowest earners would save about $42 annually on taxes while the highest earners would save more than $5,000. The average Kansas taxpayer, the department said, would save about $338 annually.

“All this does is exacerbate the gap between the very wealthy in our state and everybody else,” said Sen. Tom Holland, a Baldwin City Democrat.

A bipartisan group of senators voted Thursday to advance a separate bill to eliminate state and local food sales tax effective Jan. 1 of next year.

Currently, state food sales tax is set to be fully eliminated in 2025 while locals set their own rates. Kelly has advocated for eliminating the state tax only. Proponents of the Senate bill said elimination of local tax would eliminate confusion born of varying rates.

“The people paying this onerous tax on food they don’t know where it’s from, they just know it’s a cost,” said Sen. David Haley, a Kansas City Democrat.

Senators from both parties, however, worried the policy would cause major harm to local government budgets by removing a major revenue source.

“If you’re going to take it all the way down to zero, I question each of these locales, your cities, shopping malls where they’re going to get this other revenue,” Sen. Ron Ryckman, a Meade Republican, said. “I don’t think as a state we should take that taxing authority away.”

Rep. Mike Peterson, a Wichita Republican, said additional policy could be passed later this year to fill the budget gap for local governments.

The exact policies are likely to change as they move over to the Kansas House. Rep. Adam Smith, a Weskan Republican who chairs the House Taxation Committee, said there is some interest in reducing the food sales tax to zero and pairing it with a flat tax in hopes Kelly would sign it.

He said he was working on his own version of the flat tax proposal.

“I’m trying to minimize the fiscal note,” Smith said. He added that he’s looking at a 5.15% rate.

Other tax bills

Lawmakers also took action on tax cuts and credits for various specialized groups.

The Senate voted 36-3 to approve a bill to eliminate income taxes on all retirement benefits, a plan pushed by former Kansas Attorney General Derek Schmidt in his failed run for governor.

While Kelly has advocated for reductions to taxes on social security she had criticized any move to eliminate tax on all retirement benefits as irresponsible.

The chamber also approved separate bills creating tax credits for donations to anti-abortion crisis pregnancy centers and expanding an existing tax-credit scholarship program for private schools.

Kansas’ tax-credit scholarship program has expanded steadily over the years. The latest update allows donors to claim a credit of 100% of their donation rather than 70% and dramatically expands student eligibility for the scholarship.

The move is part of a broader push within Kansas to create more opportunities for families to choose to move students from public to private schools using state dollars. A separate bill in the House creates educational savings accounts for all Kansas families allowing them to use the money the state would spend on their child’s private education in a public school.

The Star’s Jonathan Shorman contributed to this report.