Democratic Gov. Laura Kelly vetoed a plan for hundreds of millions of dollars in tax relief over her objection to a dramatic shift to a flat income tax rate. But her veto also halts two tax-relief proposals she championed.
TOPEKA — Plans to speed up the end of the Kansas food sales tax and reduce income taxes on Social Security weren’t enough to win over Democratic Gov. Laura Kelly.
Instead, on Monday she vetoed those changes that were tied to a tax relief package of up to $570 million.
Kelly balked at a flat rate income tax structure that put both rich and poor at a 5.15% rate and carves out $330 million a year from state revenue. It also offered its biggest windfall to the state’s highest earners.
Kelly called the flat tax plan regressive because it provides more relief to the wealthiest taxpayers, something Republicans have disagreed with. She also argued the plan mishandles the $2 billion surplus in the state’s budget.
“Some lawmakers are taking our strong financial position for granted,” Kelly said. “They think our record surplus is a license to push through reckless legislation like this tax bill.”
Kelly instead proposed a one-time tax rebate that offers $450 to single Kansans and $900 to married couples. She estimates the plan would cost the state about $800 million.
The one-time cost to the state would be more responsible, Kelly said, because it does not include future tax-relief commitments that drain the state’s budget. She said that would make it harder to pay for state services — like public schools.
The Republican-controlled Kansas Legislature vowed to override Kelly’s veto. In their initial votes to pass the bill, the House reached the veto-proof majority and the Senate came up three votes shy. But three Republican senators — Chase Blasi, Carolyn McGinn and Tim Shallenburger — were absent from the vote.
Republican House Speaker Dan Hawkins said the overall package provides tax relief to all Kansans.
“In these times of economic uncertainty, when Kansans need tax relief more than ever,” Hawkins said in a news release, “it’s especially careless and out-of-touch for Governor Kelly to veto this (tax plan).”
If an override succeeds, all Kansans would pay a 5.15% state income tax, starting after the first $12,000 for married couples filing jointly. The existing tax code has three brackets, ranging from 3.1% to 5.7%.
Republicans and conservative advocacy groups contend the single rate makes the tax code fair for everyone and provides tax relief to all Kansans.
Instead of paying taxes on the first $15,000 of income, or the first $30,000 for married couples filing jointly, no one would pay any taxes on their first $6,000 of income, or $12,000 for married couples. So even though people in the lowest current tax bracket would see their rate go from 3.1% to 5.15% percent, they’d still pay less in state income taxes.
Kelly repeatedly said she was skeptical of a flat income tax. So lawmakers paired the proposal with a faster elimination of the state’s sales food tax next year and a reduction of Social Security taxes for people earning between $75,000 to $100,000 — two changes Kelly has championed.
Critics also argue a flat rate mostly benefits the richest Kansans and could throw the state’s tax code into disarray.
Donna Ginther, a University of Kansas economist, said a flat tax is also risky while the country teeters on the brink of a recession. If the nation’s economy slows down, the state would see its revenue decrease even faster.
Ginther said that would lead to the state struggling to pay for the services that Kansans rely on during difficult economic times.
“It may,” Ginther said, “create fiscal challenges for the state moving forward.”
Dylan Lysen reports on politics for the Kansas News Service. You can follow him on Twitter @DylanLysen or email him at dlysen (at) kcur (dot) org.
Blaise Mesa reports on criminal justice and social services for the Kansas News Service in Topeka. You can follow him on Twitter @Blaise_Mesa or email him at blaise@kcur.org.
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