OLATHE — Kansans will soon be paying a lower sales tax rate at the grocery store after Democratic Gov. Laura Kelly signed a tax cut into law that was approved by state lawmakers.
The governor, flanked by mostly Democratic lawmakers, signed the bill at a Hy-Vee grocery store in Olathe Wednesday as dozens of midday shoppers looked on.
The measure cuts the 6.5% state sales tax on groceries to 4% on Jan. 1, 2023. After that, scheduled reductions would take it to 2% in 2024 and zero by Jan. 1, 2025.
The proposal does not affect local sales taxes on groceries. Those are in addition to the state’s 6.5% tax.
Kelly called the measure a victory for Kansas consumers even though it falls short of her original goal of eliminating the tax by July 1.
“Food prices are going up all across the country,” Kelly said at the event. “Groceries cost way too much. Eliminating the state sales tax on food is a tax cut that helps every Kansas family.”
Barbara Conway was loading bananas into her cart when she heard that the governor was in the store to sign the tax cut.
“That’s phenomenal,” Conway said. “I have a friend that lives in another state that doesn’t pay food tax. She comes to visit and she’s astounded at how much the tax is (here).”
The cut will reduce the tax on basic food items such as produce, dairy products, meat and baked goods. Some items, like prepared meals, alcohol and tobacco will remain taxed.
Kelly first proposed elimination of the grocery tax in November, arguing that the state’s growing budget surplus made it affordable.
With inflation driving food costs up by nearly 9% over the past 12 months, Kelly said Kansas consumers needed immediate relief.
But Republican legislative leaders didn’t approve her plan. Some Democratic lawmakers contend that was to prevent the Democratic governor from getting an election-year win.
“The failure to do this is just pure partisan politics,” Senate Democratic Leader Dinah Sykes said during a news conference late in the legislative session called to draw attention to inaction on the bill.
“Let’s be honest, this would have happened in January if Gov. Kelly hadn’t been the one to call for it,” Sykes said.
Republican leaders said they needed time to weigh the governor’s proposal against ideas coming from their members to use the state’s growing budget surplus to reduce property taxes, pay down state debt and shore up the state’s rainy day fund.
House Majority Leader Dan Hawkins, a Wichita Republican, said gradually reducing the tax to zero will allow the state to adjust to a huge loss in revenue.
“You always have to hedge just a little bit on the conservative side,” Hawkins said. “Because bad things can happen. We’ve had downturns in our economy before and we’ll have them again.”
Ultimately, a House-Senate conference committee controlled by Republicans hammered out the compromise measure that Kelly signed.
Kelly’s likely challenger in the fall election for governor, Republican Attorney General Derek Schmidt, had also called for eliminating or phasing out the food sales tax.
The scheduled reductions in the tax will reduce state revenues by about $80 million in 2023 and $252 million in 2024. Total elimination of the grocery tax will take an annual $500 million bite out of state revenues.
Only 13 states levy sales taxes on groceries. Kansas’ 6.5% tax is the second highest in the nation, trailing only Mississippi’s 7% rate.
Jon McCormick, a lobbyist for Kansas grocers, said taking the grocery tax off the books will help keep stores in border towns in business.
“Over the last 12 years we’ve lost somewhere north of 20 stores near the borders and I believe that it’s caused by the sales tax,” McCormick said.
The loss of those stores is creating “food deserts” in rural Kansas, he said.
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