Department of Revenue data shows $11.2 billion in annual tax expenditures; sales-tax exemptions dominated, presenter says

Eddie, a staff presenter at the Senate Assessment and Taxation Committee’s Oct. 12 meeting, walked members through four Department of Revenue documents that together summarize statewide tax expenditures and exemptions across sales, income and property taxes.

Eddie told the committee that the state’s published tax-expenditure report lists about $11,200,000,000 in annual tax expenditures and that the sales-tax exemptions line item totals roughly $8,700,000,000, a figure he described as a statistical and conceptual total rather than an immediately actionable policy pot of money.

He explained the Department of Revenue groups sales-tax exemptions into several categories in the report: legal exemptions (about $150 million), conceptual exemptions that preserve the retail-sales-tax structure (the largest category), public-policy consumer exemptions (including a food exemption estimated at roughly $460 million for FY2024), governmental purchases (about $1.7 billion, much of that for state and local government purchases reported in K.S.A. 79-3606(b)), health-care related exemptions (prescription drugs about $110 million) and other categories such as agricultural exemptions and service exemptions.

Eddie emphasized that many figures in the report are marked confidential under state law when fewer than five taxpayers are involved and that some subsections show zero taxpayers and thus are reported as unused rather than confidential. He also noted that the report’s groupings are conceptual and that repealing many exemptions could transform the state’s retail tax system into a value-added tax in practice, a significant structural change with broad consequences.

On property-tax exemptions, Eddie summarized a Property Valuation Division memo and the statistical report, noting several categories. He said industrial revenue bond (IRB) exemptions and constitutional economic-development exemptions account for part of the exempted appraised value (IRB appraised value statewide reported near $2.6 billion in the table he cited; the economic-development exemptions rose from about $263 million to $311 million in appraised value between reporting years). He said a broader set of uniformly applicable statutory property exemptions totaled about $38.7 billion in appraised valuation in 2022, a figure that excludes some personal property values that are not required to be listed.

Committee members asked procedural questions. Senator Schallenberger asked whether a county can create a personal-property exemption on its own; Eddie replied that such exemptions typically arise under the constitutional economic-development provision or IRBs and that counties generally cannot unilaterally adopt personal-property exemptions outside statutory authority. On whether efforts to bring uniformity to sales-tax exemptions had advanced, Eddie said there had been discussion in prior sessions but no clear bill outcome and offered to research prior drafts and the subject-index report.

Eddie said the Department of Revenue can provide NAICS-code–based estimates for proposals such as taxing services but that such estimates would be approximate because statutory language and existing exemptions affect the scope of taxation.

The committee received the briefing and scheduled additional hearings and bill work on tax credits and exemptions at subsequent sessions.