Next year’s revenues increase by $407.8M in forecast, enough to cover $402.5M cost of reducing state sales tax on food
TOPEKA — A revised economic forecast for Kansas projects the state will collect $407.8 million more than previously expected in the upcoming fiscal year, adding to a budget surplus that could be used to eliminate the 6.5% state sales tax on food.
Gov. Laura Kelly, a Democrat seeking reelection this year, has made the total elimination of the sales tax on food a cornerstone of her campaign. Republicans have favored an approach that would phase out the tax over several years, as long as revenue numbers remain strong, while eying other potential tax cuts and criticizing the governor for vetoing a tax bundle three years ago.
The new revenue estimate, which is tempered for inflation and includes all of the legislation already signed by the governor, shows the state would have a $2.7 billion surplus entering July and a $3.1 billion surplus in another 12 months. The elimination of the sales tax on food would reduce revenues by an estimated $402.5 million.
“I can’t get out of this room without making another plug, specifically with inflation happening, that this does reaffirm the governor’s position that we can clearly immediately repeal the entirety of the state level food sales tax on groceries in Kansas effective July 1,” said Adam Proffitt, the state budget director, during a news conference Wednesday at the Statehouse. “These numbers do put enough into the cushion there.”
The Consensus Revenue Estimating Group, composed of state analysts and university economists, produced the revised forecast. The projections reflect spikes in oil and gas prices, payroll growth constrained by the limited pool of available workers, struggles in the manufacturing sector, and an expected reduction in net farm income.
“The good news is, even with the inflation running as high as it is, right now, the real GDP for the state of Kansas is forecasted well into the positive territory,” Proffitt said. “So a lot of good things happening across the Kansas economy. A lot of folks are at work. A lot of folks are making money.”
The projected surpluses include the budget and tax bills the governor recently signed, as well as school funding obligations the Legislature has not yet passed. A potential transfer of $1 billion into the state retirement system isn’t part of the equation.
Lawmakers on Monday will return to Topeka to wrap up work for the current legislative session, which includes putting the final touches on the state’s spending blueprint and considering an assortment of potential tax cuts.
Kelly appeared Wednesday at Jamboree Foods in Norton, just south of the Nebraska border, to tout her plan to “axe the tax” on food.
“Kansans are finding relief from inflation on groceries by traveling to our neighboring states, and that’s unacceptable,” Kelly said. “That trip for savings hurts our Kansas businesses and makes it difficult for local stores to stay open. Eliminating the state tax on groceries would keep that money in the Kansas economy.”
Republican Attorney General Derek Schmidt, who is running opposite of Kelly in this year’s governor’s race, said the governor is “not being up front” about the impact of her veto of legislation in 2019 that included a phased reduction of the state sales tax on food. The bill included large tax breaks for multinational corporations, and other tax provisions.
“I would have signed that bill into law, and as a result Kansans would already have some relief from Joe Biden’s out of control inflation at the grocery store,” Schmidt said. “Once again, the Legislature is left to clean up Laura Kelly’s mess.”
Kansas Reflector is part of States Newsroom, a network of news bureaus supported by grants and a coalition of donors as a 501c(3) public charity. Kansas Reflector maintains editorial independence. Contact Editor Sherman Smith for questions: info@kansasreflector.com. Follow Kansas Reflector on Facebook and Twitter.
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