Democratic Gov. Laura Kelly’s veto leaves the state’s tax policy largely unchanged, unless lawmakers make an unlikely return to Topeka for a special session. Both Kelly and Republican leaders called for tax cuts this year but did not land on an agreement.
Kansas Democratic Gov. Laura Kelly on Friday vetoed the final tax relief bill to reach her desk this year. It would have given tax breaks to private businesses that compete with government services — like fitness centers and child care facilities.
The rejection all but ensures no significant tax changes will be enacted in Kansas this year — unless lawmakers convene for a special session — despite both Republican and Democratic leaders seemingly making it a priority amid a $2 billion budget surplus and rising inflation.
Earlier this spring, Kelly killed off a plan for a flat tax that would have given virtually everyone in the state a break on their income taxes — but that critics saw as exceptionally generous to the wealthiest Kansans at the expense of revenue to pay for schools and other government services.
The lack of action on taxes raises the possibility of weighty cuts in 2024 — an election year where all of the members of the Kansas Legislature will be up for reelection.
Kelly said she vetoed the latest tax relief plan because it gives more tax breaks to businesses than Kansas residents.She also criticized the Legislature for packing several tax policies into one bill.
“By bundling 12 bills together,” Kelly said, “the Legislature has made it impossible to sort out the bad from the good.”
The Republican-controlled Legislature adjourned for the year, leaving Kelly the opportunity to veto the last remaining slew of bills without possibility of them being overturned.
Republican Senate President Ty Masterson initially proposed the tax break for private businesses. He said during a committee hearing that it’s unfair for local governments to tax businesses and use that revenue to provide the same service.
Critics of the idea said the government-owned facilities address needs that businesses often don’t provide — like afterschool programs at city fitness centers.
The bill also would have increased tax credits for adoption, increased eligibility to the state’s property tax refund for senior citizens and created tax credits for donations to nonprofit anti-abortion pregnancy centers. The state estimated the bill would have carved out about $80 million of revenue each year.
The chances of lawmakers overriding the veto look slim. The Legislature has already adjourned for the year and does not have the chance to vote for an override unless a special session is called.
Additionally, the lawmakers in the House fell eight votes shy of a veto-proof majority when they initially passed the bill. The Senate was one vote short.
Kelly’s veto of the proposal follows her rejection of a massive tax package cutting more than $1.3 billion over the next three years. She opposed the provision creating a flat income tax rate that would have provided the most benefit to the richest Kansans.
But that plan also included a faster elimination of the state’s food sales tax and a reduction on Social Security taxes — two proposals Kelly championed.
The Republican-controlled Legislature failed to override the veto, with the Senate coming up one vote short in its initial attempt. The Senate later tried to reconsider the override, but saw that attempt upended when Republican Sen. Rob Olson refused to support the reversal.
Despite initially voting for the override, Olson said on the Senate floor he no longer supported it because it didn’t provide enough relief for lower-income Kansans amid rising inflation.
“People are hurting,” Olson said. “I don’t think we did enough for the people at the bottom.”
Tax relief seemed like an almost certainty this year. Masterson said in January that he wanted Kelly to “meet us in the middle” to enact tax cuts. But Kelly’s rejection of the massive tax package put that in jeopardy because the Legislature did not have a back up plan.
Masterson said the bill was the only option lawmakers would send to Kelly and it was a compromise because it included her proposals for the food sales tax and Social Security income tax, according to the Sunflower State Journal.
“I’m actually shocked that she vetoed it,” Masterson said. “It really was a tax cut for everybody. It even had pieces she had proposed in it.”
Kelly also made a late tax proposal when she vetoed the bill. Her plan would have provided a one-time tax rebate that offers $450 to single Kansans and $900 to married couples. She estimated the plan would have cost the state about $800 million, but lawmakers did not take up the idea during their last week in Topeka.
However, Kansans will see at least one tax cut in the upcoming year. The state’s food sales tax rate is set to decrease from 4% to 2% on Jan. 1, 2024. The tax will then phase out completely on Jan. 1, 2025. The Legislature enacted that tax relief in 2022.
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.
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