City leaders want to know how much money impoverished Lawrence residents are charged in sales tax on groceries, and whether the city can indirectly return some of that money.
Mayor Stuart Boley brought up the idea at the City Commission’s work session Tuesday, asking his fellow commissioners if they are interested in considering such a program.
“I’ve been working to figure out how much people in Lawrence who are in poverty pay to the city, to us, in sales tax on their groceries, with the idea that we might be able to turn some of that money back around to mitigate hunger in Lawrence,” Boley said.
Kansas is one of only 13 states in the U.S. that charge any sales tax on groceries, according to a 2016 report from the Tax Foundation. In Lawrence, residents pay at least 9.05 percent sales tax on purchases, including groceries, and in some areas of the city, sales tax on purchases can be more than 10 percent.
Boley’s idea is to have a program that would help address hunger for low-income families. Vice Mayor Lisa Larsen and Commissioner Jennifer Ananda both said they are interested in looking further into the idea.
Boley brought up the topic during the commission items portion of the work session. He recognized that the city collects a significant amount of revenue from sales tax charged on groceries, and said he would like at least a portion of the amount charged to impoverished residents to be spent on a program to fight hunger.
About 17 percent of people living in Douglas County are “food insecure,” meaning they have limited or uncertain access to adequate food, according to the Douglas County Community Health Assessment. That rate is worse for children, with 1 in 5 living in households that are food insecure.
Legislation affecting the state sales tax on groceries was recently introduced, and even though as proposed it would not affect the city, Boley said he thinks the commission should consider how changes might affect the city’s budget in the future.
Earlier this month, an amendment was proposed that would phase in reductions to the state sales tax on food. If approved, it would lower the state sales tax rate from the current 6.5 percent to 4 percent in 2019, then to 2 percent in 2020 and thereafter. As proposed, the amendment would not require cities and counties to lower their local sales tax rates.
The Kansas Legislature controls the state sales tax rate and what can be exempted from sales tax. Currently, local governments’ sales tax exemptions can’t deviate from those of the state.
Ananda asked whether the proposed legislation would provide local governments the option to reduce or eliminate their sales taxes on groceries. City Attorney Toni Wheeler told the commission that she will review the pending legislation and see if that is being discussed as a possibility, but that she doesn’t think it’s likely.
Whether the city’s sales tax revenue from groceries is reduced or diverted to a community program, it could significantly affect the city’s budget. In 2016, the city collected more than $5 million in revenue from local sales tax charged on groceries, according to sales tax reports. That figure represents about 13 percent of the city’s sales tax revenue and about 2.5 percent of the city’s overall revenue for the year.
City Manager Tom Markus said if any changes are made that affect how much revenue the city collects from sales tax, the commission would have to find another revenue source or make cuts.
“If you acknowledge that there probably isn’t a substitute revenue (source), the logical extension is that it would have to come from a cut in expense from something else,” Markus said.
Boley said he doesn’t currently have a suggestion of what to cut, but now is the time to start considering options. He noted that budget season is near.
In other business, the commission received a presentation from Lawrence Memorial Hospital regarding its plans to build a 200,000-square-foot medical facility on the northwestern edge of Lawrence. The outpatient facility will include a complex of doctors’ offices, outpatient surgery rooms, physical rehabilitation centers and other services and is expected to be complete in late 2019 or early 2020.