TOPEKA — The Kansas League of Municipalities is a proponent of eliminating the state’s 6.5% sales tax on food purchases, but an unexpected wrinkle complicates that policy position.
The 2022 Legislature and Gov. Laura Kelly approved a law dropping the statewide sales tax on groceries to 4% on Jan. 1. It would fall to 2% on Jan. 1, 2024, and vaporize one year later. The Republican-dominated 2023 Legislature, which convenes Jan. 9 in Topeka, will have an opportunity to address Kelly’s plea to immediately strike the state’s share of the food sales tax. High inflation has bolstered political support for the move.
Here’s the catch: Reduction and elimination of the state food sales tax would undermine the ability of cities, such as Newton, to meet obligations of STAR bonds used to finance economic development projects that included retail stores selling groceries. The STAR bond program requires debt to be paid off with sales tax revenue, but that source of cash would be diminished when the state’s portion of the food sales tax was shelved.