TOPEKA — A session-long standoff between Gov. Laura Kelly and state legislators over changes in tax policy reached its inevitable climax Thursday when the governor vetoed a bipartisan tax plan as promised.
The Democratic governor will call lawmakers back to Topeka for a special session.
“I recognize that Kansans desperately need tax relief. I will be working with legislative leaders to come to a compromise, forging a bipartisan tax cuts plan that will responsibly provide tax relief for all Kansans without threatening our state’s future fiscal stability,” Kelly said. “Next week, I will be announcing the date of a special legislative session so we can deliver comprehensive, sustainable tax cuts. If we all work together, an affordable, bipartisan tax plan can be passed in less than a day.”
The governor had threatened from the start of the year to call a special session if lawmakers refused to pass a tax plan she endorsed.
Instead, Republican leadership tried and failed to impose a single-rate income tax, known as a “flat tax,” earlier in the year, but couldn’t override the governor’s veto. The plan would have gifted a windfall to the state’s wealthiest wage earners.
Republicans then pivoted to a more modest, two-tiered income tax rate — packaged with other income and property tax cuts favored by the governor — and won the support of House Democrats, who viewed it as the best deal they were likely to get for constituents during an election year.
But Kelly — jilted by GOP leaders’ unwillingness to consider Medicaid expansion and fearful of the costly ramifications of a big tax cut package — vetoed that plan, as well, and proposed her own package of tax cuts. Once again, Republicans ignored the governor and adopted legislation that was nearly identical to their previous failure.
So she followed through on her promise.
“I have given the Legislature several roadmaps to fiscally responsible tax cuts since January,” Kelly said. “Instead, they played political games with reckless tax policies, and I vetoed them. I said irresponsible tax policies would lead to a special session.”
Lawmakers now will have to suspend their reelection campaigns and return to Topeka to produce a plan the governor is willing to sign. They also could entertain other bills on any other subject matter, but it would mean starting from scratch with a new piece of legislation. All bills introduced over the past two years were voided when lawmakers adjourned the regular session.
Republicans are expected to try to hold the line on provisions included in Senate Bill 37, which cleared the House by a 108-11 margin and the Senate 25-9. But the prospect of another veto may force them to compromise with the governor.
The biggest flashpoint for controversy this year involved disagreements over proposed changes in the state’s income tax system.
Kansas currently uses a three-tier rate structure: 3.1% for income under $15,000, 5.25% for income between $15,000 and $30,000, and 5.7% for income above $30,000. The income amounts are doubled for couples filing jointly.
SB 37 would have established two rates: The first $23,000 in income would be taxed at 5.2%, and anything over $23,000 would be taxed at 5.57%. The threshold would be $46,000 for couples.
The changes would have reduced income tax collections by an estimated $1.085 billion over five years.
Kelly’s proposal would have kept the three-tier income tax system but lowered the rates to 3%, 5.2% and 5.65%. That would lower tax collections by an estimated $806 million over five years.
The Legislature and governor were on the same page with proposals to exempt Social Security income from income tax collections, and to move up the elimination of the sales tax on food from January to July.
The governor wanted to exempt $125,000 from residential property values before applying the state’s property tax, while the Legislature wanted to exempt $100,000 and lower the rate from 20 to 19.5 mills.
The Legislature’s plan also would abolish the Local Ad Valorem Tax Reduction Fund. From 1937 to 2003, the state distributed a portion of sales tax collections into the fund, which then offset local property taxes. County-level officials had hoped to persuade lawmakers to revive the program, rather than abolish or continue to defund it.
The governor’s proposal also would have added a child care tax credit valued at $18 million per year.
Kansas Reflector is part of States Newsroom, a network of news bureaus supported by grants and a coalition of donors as a 501c(3) public charity. Kansas Reflector maintains editorial independence. Contact Editor Sherman Smith for questions: info@kansasreflector.com. Follow Kansas Reflector on Facebook and Twitter.
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