Kansas lawmakers are considering a constitutional amendment that would create a fund intended to support the gradual elimination of state income, property, and motor vehicle taxes.
House Concurrent Resolution 5034 would establish the Freedom from Taxes Fund. The measure would also create a Kansas Citizens Freedom Review Board to examine existing sales tax exemptions and recommend which exemptions should be ended.
House Speaker Pro-Tem Blake Carpenter, who designed the proposal, said Kansas has about $9 billion in sales tax exemptions and estimated that about $2 billion could be considered first.
Under the proposal, revenue from any sales tax exemptions that are eliminated would be deposited into the Freedom from Taxes Fund. The bill says the money would be invested and that only investment earnings, not the principal, could be used to offset taxes. The principal would be protected in the state constitution from appropriation or diversion.
The measure sets an order for tax reductions. Fund earnings would first be used to replace motor vehicle property taxes, then state mandated property taxes, and then state income and privilege taxes imposed on financial institutions.
The proposal says taxes would be reduced or eliminated only when investment earnings are sufficient to replace the revenue involved.
Any sales tax exemptions that remain in place after the review board’s initial work would be subject to review every five years and would require renewal to continue.
State Revisor of Statutes Adam Siebers said the board’s recommendations would be sent to the governor, the state treasurer, and the legislature through official channels. Available legislative documents do not specify how the board would be selected or how many members it would have.
The House Tax Committee heard testimony on the measure but has not voted on it.
Carpenter told lawmakers the fund would create what he described as “a permanent financial structure that gradually builds the capacity to replace certain taxes with investment earnings.”
He also told the committee that taxes would be reduced or eliminated only when investment earnings are sufficient to replace the revenue “in a sustainable manner.”
Kansas currently levies income, sales, and property taxes. The state also has a top individual income tax rate of 5.7% and a corporate income tax rate of 4%. The statewide sales tax rate is 6.5%, with additional local rates.
Sales tax exemptions in Kansas apply to a range of goods and services, including groceries, prescription drugs, manufacturing equipment, and agricultural inputs.
The proposal compares the fund to permanent fund structures used in other states. Alaska operates the Permanent Fund, which was established in 1976. Wyoming operates the Permanent Mineral Trust Fund. New Mexico also maintains permanent funds that support public programs.
The timeline for any tax reductions under the Kansas proposal is not specified in the resolution. The measure says tax reductions would occur only when investment earnings reach levels sufficient to replace targeted tax revenue.
As a constitutional amendment, the proposal would require approval by two thirds of both legislative chambers and then approval by Kansas voters in a statewide referendum before it could take effect.
Source: Freedom From Taxes Fund envisions eliminating property and income taxes by removing some sales tax exemptions | The Heartlander