Schmidt, Kelly ring up intriguing campaign narratives about Kansas’ sales tax rate

TOPEKA — Views of Democrat Laura Kelly and Republican Derek Schmidt on the state’s extraordinarily high sales tax on groceries has become rich fodder in their campaigns for governor.

Schmidt’s campaign insisted the GOP attorney general beat Kelly to the punch in 2021 with a proposal to eliminate or significantly reduce the 6.5% state sales tax on food, but Kelly proposed reform while running for governor in 2018.

Kelly, with hatchet in hand, dedicated herself this year to raising public interest in sales tax reform. So far, Republicans in the Legislature have stiff-armed Kelly’s plan to end the state’s portion of sales tax on food on July 1.

Both candidates declared victory with signing of a bipartisan bill slicing off chunks of the state’s sales tax on groceries until vanquishing it in January 2025. The change is expected to eventually cost the state treasury $500 million annually, and was made possible by development of an unprecedented budget surplus.

“When Kansans needed it most, we were able to bring Democrats and Republicans together to eliminate our state’s tax on groceries,” Kelly said. “Because we saved for our collective future, we can now responsibly axe the food tax — all while boosting funding to Kansas schools, roads and law enforcement.”

Under the new law, Kansas’ rate on groceries would fall to 4% in 2023, 2% in 2024 and zero in 2025.

Schmidt, the Republican Party’s likely nominee for governor, said Kelly could have dealt earlier with the highest food sales tax in the nation had she signed in 2019 a bill comprised of special-interest tax adjustments and gradual reduction of the state’s sales tax on groceries. If signed three years ago, which Kelly said would have been fiscally irresponsible, the state’s tax on groceries would be 2.9% and headed for zero in 2023.

Schmidt asserted a closer relationship among the governor and House Speaker Ron Ryckman, R-Olathe, and Senate President Ty Masterson, R-Andover, was needed to make quick work of a sales tax reform bill. GOP House and Senate leaders decided not to vote on the stair-stepped sales tax bill until three months into the annual legislative session.

“I’ll let you in on a little secret,” Schmidt told Republicans at a Linn County gathering. “The way you get it done is you sit down with leaders from the Legislature and say, ‘I’m going to get this done. I’m gonna round up the votes. What’s the game plan?’ I’ll tell you what you don’t do — pick up a hatchet and go from produce aisle to produce aisle in grocery stores around the state.”

Those old Senate votes

Schmidt’s campaign said Kelly was in the Kansas Senate when she voted in 2010 to avoid more state budget cuts — six rounds of slash-and-burn action had trimmed spending nearly $1 billion — by temporarily raising the overall state sales tax from 5.3% to 6.3%.  After the third year of that plan signed into law by Democratic Gov. Mark Parkinson, the state sales tax was to fall back to 5.7% with part of the revenue dedicated to highway programs.

Schmidt, representing Independence in the Kansas Senate at that time, voted against that sales tax legislation.

Emma O’Brien, spokeswoman with the Kansas Democratic Party, said scrutiny of legislative history on the statewide sales tax showed Schmidt voted in 2002 to increase the rate from 4.9% to 5.3%. He voted to sustain the 5.3% sales tax through 2006, she said, but it remained at that level until increased again in 2010.

“While Derek Schmidt has offered Kansans nothing more than empty words, Governor Kelly put in the work to make sure Kansans got much-needed financial relief,” O’Brien said. “Schmidt can claim to support eliminating the food sales tax until he’s blue in the face, but Kansans know the truth. He voted to hike the food sales tax as a state senator, and he refused to publicly support Governor Kelly’s plan to axe the food tax. He’s all hat, no cattle.”

Parkinson declined to seek election to a full term as governor in 2010, and yielded the office in 2011 to Sam Brownback, a former U.S. senator who easily won election as governor. Brownback signed a controversial bill in 2012 aggressively lowering the state’s income tax, which was part of his goal of ending that tax in Kansas. The resulting state government revenue shortfall wasn’t met by budget cuts, so the governor worked out a deal to block the promised reduction of the state’s sales tax to 5.7% in 2013.

Instead, Brownback moved the state’s rate to 6.15% in 2013 and 6.5% in 2015 to assist with the state’s massive budget deficits. The Legislature ended Brownback’s end-the-income-tax experiment in 2017.

Christopher Reeves, who served as a national Democratic committeeman from Kansas from 2016 to 2021, said Kelly consistently sought to lower the state sales tax on groceries in a manner that didn’t inflict damage on the state’s overall finances. The budget surplus of $3 billion offered the opportunity for instant elimination of the state sales tax on groceries, he said, but GOP leadership didn’t want Kelly’s preference to prevail ahead of the November election.

“That is a very toxic and dangerous strategy,” Reeves said.

House Majority Leader Dan Hawkins, a Wichita Republican, defended the Legislature’s three-year approach of incremental reductions in the food sales tax. He said there were real threats of broader economic downturns that could necessitate reconsideration of the food sales tax rate.

“Bad things can happen,” he said. “You always have to hedge maybe just a little bid on the conservative side.”

Bulging economic veins

Schmidt criticized President Joe Biden — not President Donald Trump — for responding to the COVID-19 pandemic and associated economic challenges with increases in federal spending aimed at sustaining families and businesses. Biden signed the $1.9 trillion American Rescue Plan in March 2021 and the $1.2 trillion Infrastructure Investment and Jobs Act in November. Biden’s American Rescue Plan included $1,400 cash payments to Americans.

In April, Kelly proposed a state budget amendment allocating $460 million of the state treasury’s surplus for one-time $250 tax rebates to all Kansans filing a 2020 tax return. The GOP-led Legislature dismissed her recommendation.

Trump, who was defeated by Biden for re-election in November 2020, signed a series of bills in 2020 in response to COVID-19. He made $3.7 billion available for food, health, tax and unemployment aid with the Families First Coronavirus Response Act. That was followed by the $2.2 trillion CARES Act, the largest economic stimulus package in U.S. history.

In 2020, Trump signed legislation granting Americans stimulus checks of $1,200 per person and a second round of direct payments of $600 per person. He claimed the second installment was paltry and urged Congress to allocate $2,000 per person in economic relief.

“The amount of money Congress has printed and shoved into the nation’s economic veins is not sustainable,” Schmidt said. “The reality is we need more conservative leadership that understands the value of a dollar that doesn’t think the way you make people happy is to just shower them with their own money.”

O’Brien, of the state Democratic Party, said Schmidt demonstrated disdain for Kansas taxpayers through policies he supported and “bogus lawsuits” he’d pursued as attorney general.

“Promising he won’t work to put money back in Kansans’ pockets after spending years standing by Sam Brownback as he tanked the state’s economy and stuck the bill with Kansas families shows how out of touch he is with what Kansans need and want,” she said.