Kansas Tax Exemptions: What Should Be Reviewed and What Should Be Protected
Jay Vanier
Kansas doesn’t just have a tax rate problem. Kansas has a tax base problem.
Over time, our state has carved out billions of dollars in exemptions across sales tax and property tax. Some of those exemptions are essential. Others may be outdated, overly broad, or no longer delivering the economic benefit they were intended to create. According to the Kansas Department of Revenue, the state forgoes approximately $9.0 billion per year in sales tax exemptions alone.
That raises a serious question, are all those exemptions still working for Kansas taxpayers?
Not all exemptions are created equal. Some are fundamental to how a fair tax system works. Others are policy choices that should be reviewed regularly. There are certain exemptions that serve a clear purpose and should not be the starting point for reform:
· Food and groceries — $430 million
· Prescription drugs and health care — $134 million total
· Resale and production inputs (anti-double taxation) — $3.1 billion+
· Government and nonprofit entities — $1.7 billion+
These exemptions exist for good reasons, they are either:
· Essential to keeping costs down for families, or
· Necessary to prevent taxing the same product multiple times
Eliminating them would raise costs and hurt Kansas’ competitiveness. If we are serious about tax reform and serious about lowering property taxes, we need to focus on exemptions that are either outdated, industry-specific or lacking clear proof they are still working
Large Exemptions That Deserve Review
Some exemptions are significant in size and should be evaluated based on real economic return:
Integrated production machinery & equipment — $269.8 million
Enterprise zone exemptions — $194.8 million
Farm machinery and agricultural equipment — $194.4 million
Residential & agricultural utilities exemption — $137.0 million
Taxpayers deserve to know are the delivering measurable results to the community. Other exemptions worth examining include custom software exclusion at $63.0 million and the sales tax exemption on meals provided to employees the employer at $15.7 million
This is not about eliminating everything. It’s about being smart, targeted, and accountable.
A responsible approach would be to protect the essentials such as food, medicine, anti-double taxation provisions and core nonprofit functions. Large exemptions require a return-on-investment (ROI) analysis. A determination needs to be made as to whether the exemptions are still creating jobs and growth. Exemptions that no longer serve a clear purpose
Going forward Kansas needs to use the right tools to grow, but we also need to ensure our tax system is fair, sustainable and working for everyone. That’s how we compete and that’s how we build a stronger future for Kansas.