Removing sales tax on food creates a mess — why not add tax holidays instead?
The Kansas Reflector welcomes opinion pieces from writers who share our goal of widening the conversation about how public policies affect the day-to-day lives of people throughout our state. Ron Smith is a fifth-generation Kansan, a native of Manhattan, an attorney practicing in Larned, a grandfather several times over, a Vietnam veteran and a civil war historian.
It’s re-election time. It’s easy to tell. The leading champions of What’s Good for Us This Year all agree that we should remove the sales tax on food.
We don’t yet know what they mean by food. Someone has to write definitions. Is it tax elimination just for food sold at the grocery store? Or will my McDonald’s french fries be taxed? What about food sold in a quick shop? Or sold directly on a farm? What about fresh Kansas brats at a K-State-KU football game?
The current governor wants to exempt food from the 6.5% state sales tax. Actually, she may want to do this to neutralize the issue with her probable opponent in next year’s gubernatorial race. If they’re both for the same thing, voters must choose between them based on something else.
The governor promises it will provide Kansas families with about $500 per year in savings at the grocery store. That’s maybe funding three or four more trips to the grocery store for the proverbial family of four. Good. It’s wonderful that the governor is concerned that my candy bar and soda can put the fat on me without being taxed.
C’mon. Let’s get serious.
The cost of removing the food sales tax is about $480 million. We can’t eliminate the entire state sales tax because it generates $2.8 billion (in 2020). Giving that all back would require filling the hole with major increases in other taxes, such as the state income tax. Unless, of course, you can find $2.8 billion in budget cuts.
Doubtful. Cutting taxes is easy. Cutting budgets with big numbers would electrocute candidates at the polls.
If we remove the food sales tax, we can get all those Kansas City Missourians to drive to Johnson and Wyandotte counties to load up on groceries and save money. That stimulates tourism, but why give tax breaks to out-of-staters who live near our border?
Why not a tax holiday? Or two. Let’s stimulate the entire economy at the same time.
A tax holiday is a day or two in the year when the state declares its 6.5% sales tax is not collected on any item purchased.
If you buy groceries, you save on the tax. Tacos at Taco Bell, no tax.
But let’s broaden it to include eliminating the sales tax on any taxable item during that one- or two-day period. Wanna buy a $50,000 pickup? Save 6.5% of the cost — $3,250. And if the dealer gives you a lower sticker price on that holiday, you save the sales tax not charged and get the rebate.
Need new furniture or a washer-dryer? No sales tax.
Excluding holidays and Sundays, we have about 300 days a year to choose from. Each day of the “holiday” on average would cost about $9 million in lost state sales tax revenue. Do the math. You could have 51 holidays with no tax and the state gives back the same $480 million. I doubt that many would be scheduled.
There must be strings, of course. If you buy your pickup or big-ticket item, you would still pay the tax to the merchant or dealer, but you get a receipt. You fill out a form and send the receipt and form to the Kansas Department of Revenue, which double checks (audits) the transaction and then refunds the money from the state directly to you.
Having the state refund money collected is sort of like the way older folks get a property tax refund.
Do we want to have Missourians coming to Kansas to buy their pickups on these tax holidays? Maybe, maybe not. Whether the holiday is available only to Kansas residents is a policy decision. We can ensure that there is no collusion between car buyer and car seller by auditing the sale to see if the buyer registers and tags the vehicle in Kansas.
A Missourian buying a vehicle here won’t get his refund unless he can show that it was registered and taxed in Missouri. But at least a Kansas business gets a sale. Out-of-state buyers also must pay a use tax, so there may not be a sales tax savings for them. (Every good law requires tweaking, after all.)
Taking the sales tax off food is a nice election year gimmick, but I doubt it stimulates the economy. A few sales tax holidays might. Worth looking into.
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