(Updated to include more details of the governor’s new tax plan and comments from House speaker and Senate president)
Gov. Laura Kelly on Wednesday vetoed a $1.56 billion tax bill that would move the state to a two-tier structure, saying it would put the state’s fiscal stability at risk in the future.
The governor’s veto sets up a showdown with the Legislature, including members of her own caucus who unanimously supported the bill in the House.
It is the sixth time during her tenure as governor that Kelly has vetoed a tax bill out of concern about how it would affect the state budget, evoking the budget turmoil during former Gov. Sam Brownback’s administration that followed deep tax cuts.
Since she was elected in 2018, Kelly has placed a premium on protecting the state’s fiscal health even at a time when the state is projected to be have more than $3 billion in reserve.
“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 said in a statement.
“I have said repeatedly that I will do everything in my power to prevent our state from the fiscal mismanagement of the previous administration.
“Since becoming governor, my administration has been laser-focused on getting us back on track, so we don’t go back to the days of four-day school weeks, crumbling roads and bridges, and crippling debt.
“This bill is too expensive and risks reversing the progress we’ve made. ”
House Speaker Dan Hawkins accused the governor of shifting positions on taxes.
“We all saw unanimous support for this tax relief bill in the House. We all saw the bipartisan majority support for this bill in the Senate. And we’ve all seen the revenue estimates that say this plan is sustainable,” Hawkins said in a statement.
“One by one we’ve overcome Governor Kelly’s objections to delivering your money back to
you in the form of property, income, Social Security, and sales tax relief. And every time, the governor moves the goalposts and vetoes the bill,” he said.
“At this point, there are two more things that deep down we all know to be true- Kansans need and deserve tax relief and Gov. Kelly isn’t serious when she says she wants to provide it,” he said.
Senate President Ty Masterson echoed that view.
“Kansans are rightfully frustrated by the governor’s decision to yet again veto sustainable property, income and sales tax relief primarily geared to help those with lower incomes,” Masterson said in a statement.
Masterson said that Kelly has rejected 75 tax cuts during her tenure has governor, “preferring to keep record surpluses in government coffers rather than returning to the people.”
Kelly called on lawmakers to support her new proposal that cut income taxes across the board while retaining all three tax brackets.
She said the plan would cost $433 million a year.
The plan approved by the Legislature would cost about $628 million in 2025, about $458 million in 2026 and $462 million in 2027.
The tax bill passed by the Legislature – unanimously in the House and 24-9 – in the Senate, would lower income tax rates, increase the personal exemption, eliminate state income taxes on Social Security, accelerate elimination of the sales tax on food and increase the standard deduction.
The plan would move the state to a dual-tiered structure with income tax rates of 5.55% and 5.15%. Those rates are now set at 5.7% and 5.25%. The lowest bracket would be eliminated.
The income threshold for the 5.15% tax bracket would change to earnings up to $23,000 for single filers and $46,000 for joint filers. The threshold for the lowest bracket in Kansas is now $15,000 for single filers and $30,000 for joint filers.
The new plan still eliminates the income tax on Social Security benefits and accelerates the elimination of the food sales tax to July 1.
It also increases the residential exemption on the state’s 20-mill property tax rate from about $42,000 to $100,000. It lowers the property tax rate to 19.5 mills.
The new plan increases the state’s personal tax exemption for single filers to $9,160 from the current level of $2,250 person. For joint filers, the exemption would increase to $18,320. The exemption would be $2,320 for dependents.
Fiscal analysts said while it may appear on paper that the new plan would increase taxes, significant increases in the personal tax exemption ensure there will be a cut.
The plan also calls for a 3% increase in the standard deduction. It would increase the standard deduction to $3,605 for single filers, $8,240 married joint filers and $6,180 for head of household.
Kelly immediately urged lawmakers to support her plan.
“Kansans need meaningful sales, property, and income tax relief. However, we must ensure that the plan is affordable for the long term,” Kelly said.
“We must be mindful of the fiscal mistakes of the previous administration and ensure we can provide tax relief while continuing the progress we have made as a state.”
Kelly’s tax plan would:
- Retain three tax brackets at 5.65%, 5.2% and 3%.
- Increase the standard deduction for single Kansans from $3,500 to $5,000; for those with head of household filing status from $6,000 to $7,500; and for those who are married filing jointly from $8,000 to $10,000.
- Exempt the first $125,000 in property taxes from the 20-mill property tax homeowners pay for schools. The lost revenue would be made up from the general fund.
- Eliminate state income taxes on Social Security income.
- Expand the state’s child and dependent care tax credit to 100% of the federal allowance. State law currently caps the credit at 25% of the federal credit, which provides a maximum of $2,100 for out-of-pocket expenses for child care.
- Accelerate elimination of the state sales tax on food to July 1.
A profile run by the governor’s budget office shows that the state would have an ending balance of about $526 million by 2028 and rainy-day fund of about $1.9 billion.
The budget office had run a similar profile of the tax bill passed by the Legislature and it showed the state going in the red by nearly $400 million by 2029 albeit with a $1.9 billion rainy-day fund.
