Gov. Kelly vetoes tax cut, proposes new plan
TOPEKA (AP) - Kansas' Democratic governor on Wednesday vetoed a broad package of tax cuts for the second time in three months, describing it as “too expensive” despite the bipartisan support it enjoyed in the Republican-controlled Legislature.
Gov. Laura Kelly and her staff had signaled that she had misgivings about a package of income, sales and property tax cuts worth $1.5 billion over the next three years. Her chief of staff said before it cleared the Legislature this month that it was larger than Kelly thought the state could afford in the long term. The governor also told fellow Democrats that she believes Kansas' current three personal income tax rates ensure that the wealthy pay their fair share. The plan would have moved to two rates.
The governor immediately proposed new tax cuts worth roughly $1.3 billion over the next three years, but the Kansas House's top Republican immediately said the governor “isn't serious” about tax relief. The Legislature was set to reconvene Thursday following a spring break and wrap up its work for the year in just six days.
“While I appreciate the bipartisan effort that went into this tax cut package and support many of the provisions included, I cannot sign into law a bill that jeopardizes our state’s future fiscal stability," Kelly wrote in her veto message. “This bill is too expensive."
Top Republican legislators have wanted to move Kansas to a single personal income tax rate, which at least five other GOP-led states have done since July 2021, according to the conservative Tax Foundation. But their dispute with Kelly over that idea has meant that Kansas hasn't enacted big tax cuts, even as surplus funds have filled its coffers.
In January, Kelly vetoed a plan to cut taxes by $1.6 billion over three years that Democrats largely opposed. It would have moved Kansas to a single-rate personal income tax, and Kelly argued it would have benefited the “super wealthy,” which Republicans disputed.
“Kansans need and deserve tax relief, and Governor Kelly isn’t serious when she says she wants to provide it," House Speaker Dan Hawkins, a Wichita Republican, said in a statement.
Democrats were split over the bill Kelly vetoed. In the Senate, they largely opposed it for the same reasons Kelly did, while in the House, no members voted against it. The votes suggest that some House Democrats could break with Kelly and vote to override her veto, but it's not clear whether Republican leaders could muster the two-thirds majority needed in the Senate.
Kelly isn't the only governor at odds with lawmakers over taxes. In neighboring Nebraska, Republican Gov. Jim Pillen said he'll call a special legislative session over rising property taxes. The conservative Legislature there adjourned last week without passing Pillen’s plan to fund property tax relief by raising the state’s sales tax and applying it to more goods and services, including candy, soda and digital advertising.
The bill Kelly vetoed also would eliminate income taxes on Social Security benefits, which kick in when a retiree earns $75,000 a year. It would reduce the state’s property taxes for public schools and eliminate an already-set-to-expire 2% sales tax on groceries six months early, on July 1.
In moving Kansas from three personal income tax rates to two, it would drop the highest top rate from 5.7% to 5.55%.
Kelly's new plan includes the same sales tax and Social Security provisions, as well as a version of the property tax cut. Her plan would keep all three personal income tax rates and lower them. Her highest rate would be 5.65%.
Last week, a new fiscal forecast provided a stable picture for state government through the end of June 2025. A separate projection from legislative researchers said that even with extra spending approved by lawmakers this year and the tax cuts Kelly vetoed, the state would end June 2025 with more than $3.7 billion in surplus. Kelly argues that problems would arrive in future years, though Republicans strongly disagree.
Kelly won the first of her two terms in 2018 by running against the fiscal policies of a Republican predecessor, Gov. Sam Brownback. Big budget shortfalls followed large income tax cuts in 2012 and 2013 and continued until most of the cuts were repealed in 2017 over Brownback's veto.
But Republicans argue that warnings from Kelly hearkening back to Brownback's policies have lost credibility as surplus revenues have piled up.
“It’s far past time for the governor to put her worn-out Brownback rhetoric on the back burner and finally make our Kansas families the top priority,” House Taxation Committee Chair Adam Smith, a western Kansas Republican, wrote in a column Tuesday in the Kansas City Star.