The fourth meeting of the Governor’s Council on Tax Reform concluded this afternoon. The bipartisan group is performing an in-depth study of the state’s current tax system, and today submitted an initial round of recommendations for consideration by the Kansas Legislature in the upcoming session.
“I want to thank the Council for its work in preparing thoughtful recommendations, and look forward to their continued study in 2020,” Governor Laura Kelly. “The proposals they shared today reflect my vision for a fiscally responsible, fair and sustainable tax structure that will keep the tax burden as low as possible for Kansas individuals and businesses.
The Council recommended:
- A food sales tax rebate. The Council recommended a new Food Sales Income Tax Credit that would be refundable, have income limits based on Federal Adjusted Gross Income and be limited to taxpayers who were Kansas residents for the entire tax year. If the food sales tax rebate is fully implemented, it is estimated that over 400,000 Kansans would receive a refund.
- A return to implementation of the Local Ad Valorem Tax Reduction Fund (LAVTRF) as a way to help local governments keep their property taxes low. Previously funded by 3.63% of the state sales tax, the LAVTRF has not been funded since 2003. If fully funded again, local governments would once again have a strong tool to begin lowering local property taxes.
- Implementation of a tax on out-of-state marketplace facilitators and digital products. While the Department of Revenue notice earlier this year requires out-of-state retailers to register and collect and remit use tax on sales made in the state, existing statute does not allow the state to make the same requirements of marketplace facilitators. A marketplace facilitator is a person who facilitates a sale through an internet or physical retailer. The proposal related to digital products would apply the state sales tax to all sales of digital products and subscription services, such as digital books and music.
- Caution by the Governor and the Legislature: Given the devastation prior tax policy has had on Kansas, the Council recommended the Governor and the Legislature be very cautious with proposals that diminish revenue until Kansas has fully regained its fiscal health.
- Property tax lid exemption for transportation: The Council recommended that an exemption be made to the existing property tax lid for the funding of local transportation projects. A significant portion of expenditures at the local level are for road and bridge repairs and the property tax lid has far too often been a hindrance to those needs. During the Department of Transportation’s local consult meetings across the state, a number of communities expressed the need for this exemption.
- Affirming the need to bring back the 3-legged stool: Additionally, the Council recommended the state strive to bring balance back with a 3-legged stool approach to taxes — income, property and sales. During the past few months, the Council found evidence that the state’s current tax policy has an imbalanced tax structure with income taxes and property taxes being significantly out of balance.
- Future items to consider: The Council also approved a list of items they are planning on studying and reviewing during the next calendar year. Those are: broadening the tax base, tax exemptions, review of progressivity v. regressivity within the current tax system, Earned Income Tax Credit (EITC), Global Intangible Low-taxed Income (GILTI), decoupling and overall property tax relief.
Over the course of its study, the Council will make additional specific statutory recommendations to state lawmakers on tax reform in Kansas. A final report is due in December 2020, in advance of the 2021 legislative session.
For more on Governor Kelly’s executive order establishing the Council, its membership and presentation materials: