Gov. Laura Kelly on Thursday morning rallied House Democrats to support a new tax bill that she declared would be a “huge victory” since it moves Republicans off their quest for a single rate tax structure.
Kelly met with House Democrats on Thursday morning, warning them about joining any effort in the House to send the bill back to committee.
She cautioned that it could potentially produce results worse than the current tax plan that Democrats fear doesn’t do enough to help low-income earners.
Republican state Rep. Stephen Owens of Hesston has said he plans to make a motion to send the bill back to committee if, and when, the bill arrives in the House.
“The other side has gone a lot farther than they wanted to go,” Kelly said of GOP lawmakers. “We should be applauding ourselves.”
“This is a huge victory for our side,” she said. “When I look at what we have here, I just am amazed that we came out like this. There’s so much of what we wanted.
“We should be embracing this and taking credit for it,” she said.
Kelly tried to encourage support the bill after Democrats in the House expressed concern about what the bill did – or did not do – for low-income earners.
“It looks like the same old, same old, taking care of the rich, leave the middle class behind,” House Minority Leader Vic Miller said after the bill came out on Wednesday.
The bill retains the state’s three-tiered tax bracket. It cuts the upper bracket to 5.5% from 5.7% but leaves the tax rates for the other two brackets in place.
But the bill also includes something Kelly wanted, an expansion of 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.
Kelly noted that the bill up for debate is very different from Republican efforts at the start of the legislative session to pass a single tax rate, which the governor vetoed.
“The Senate wanted that flat tax, wanted it really bad,” Kelly said.
“Even though it was doomed, that I was going to veto it, they went ahead and spent a lot of political capital and put their folks in some pretty precarious positions.
“That’s how much they wanted it,” she said.
Kelly said there were a number of ways the bill helped less affluent Kansas.
She cited a provision increasing the residential exemption on property taxes for schools from about $42,000 to $100,000.
The tax rate also would be reduced to 19.5 mills from 20 mill.
Kelly said the bill cuts taxes but in a way that it would not cripple the state budget.
She said her administration wanted a tax bill that would cost no more than about $425 million a year. The new bill is no more than $430 million from 2026 to 2029.
The first year is $576.2 million, but it is front-loaded because the bill ends the state sales tax on food this summer instead of waiting until next year.
Democratic state Rep. Rui Xu of Westwood asked the governor about the value of a three-tiered structure when the House bill with the two-tiered structure was “far, far progressive in terms of income tax than the compromise bill.”
Xu said he preferred more tiers, but in the absence of that he believed the two-tiered structure approved by the House was a better position because it wouldn’t have taxed the first $7,000 for a single filer and the first $14,000 for a married couple filing jointly.
Kelly said the state would not only take a revenue hit by moving to a two-tiered structure, but it was a step closer to moving to a single rate.
“We don’t want to start down that path,” she said, alluding to the tax cuts enacted under Gov. Sam Brownback’s administration.
“We saw what happens when we change our tax structure in a way that doesn’t work for Kansas,” she said.
“I think it’s important that we try to preserve that.”
In short, the new bill, which costs about $1.4 billion over three years, does the following:
- Retains the state’s three-tiered tax bracket but doesn’t change the income thresholds. It cuts the upper bracket to 5.5% from 5.7%. This provision, along with increases in the standard deduction, would cost about $590 million over three years and is the most expensive part of the plan.
- Eliminates income taxes on Social Security. It would cost $400 million over three years.
- Increases the standard deduction for single filers to $5,000 from $3,500. It increases the standard deduction to $7,500 for head of household from $6,000. It also raises the deduction to $10,000 from $8,000 for married couples filing jointly. The deduction would not increase with inflation.
- Increases the residential exemption on property taxes for schools from about $42,000 to $100,000. It lowers the statewide property tax rate to 19.5 mills from 20 mills. This measure costs about $309 million over three years and would be replenished by the state general fund.
- Expands 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. This would cost roughly $36 million over three years.
- Accelerates the elimination of the state sales tax on food to this July 1. It was not scheduled to lapse until next year. This will cost about $63.5 million this year.
- Repeals the local ad valorem tax reduction fund, which hasn’t been bankrolled in 20 years but was used to send money to local governments to lower property taxes.
Dinah Sykes, the Senate’s top Democrat, had opposed the latest House tax plan because it was too costly. She also thought it was a “glide path” to a flat tax.
Sykes embraced the new plan adopted by the conference committee on Wednesday.
“The tax agreement announced today is a compromise that includes key pieces of the governor’s proposal,” Sykes said.
“While this isn’t the perfect plan, this is what compromise looks like,” she said.
“This has been a difficult and divisive legislative session, but I’m glad Democrats and Republicans could come together to cut taxes for all Kansans,” she said,
