A veto and a switch: Kansas to see no big tax cuts this year

No big tax cuts are coming for Kansas residents even though the state treasury is bulging with surplus cash and the Democratic governor and top Republican lawmakers both said over and over that families need relief from inflation.

Republican leaders went into the final days of the GOP-controlled Legislature’s annual session hoping to override Gov. Laura Kelly’s veto of a bill cutting taxes nearly $1.4 billion over the next three years. Instead, a Republican senator helped kill the GOP bill after voting for it the day before — and promptly lost his committee chairmanship.

Legislators adjourned Friday night without overturning Kelly’s veto or passing another bill. The state now expects to have a surplus of nearly $2.6 billion at the end of June 2024, on top of $1.6 billion socked away in a separate rainy day fund, when annual tax collections are roughly $10 billion.

“Everybody’s going to be frustrated — business owners, families, households,” said Kansas House tax committee Chair Adam Smith, a Republican from far western Kansas.

Tax debates in Kansas have been fraught ever since a 2012-13 experiment in slashing income taxes under then-GOP Gov. Sam Brownback went sour as big, persistent budget shortfalls followed.

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Lawmakers eventually reversed most of the experiment, but the political turmoil helped Kelly win the governor’s office in 2018 and reelection in 2022. She still invokes Brownback’s name in clashes with Republicans.

Her main beef this year was GOP leaders’ plan to move Kansas to a single-rate “flat” income tax for individuals and abandon a three-rate system requiring higher earners to pay a higher rate. The new tax rate would have been 5.15%, while the top rate now is 5.7%

Republicans said that when Kelly announced her veto Monday, it already was too late to start on a new bill. But even on Thursday, Kelly told reporters, “They still have time.”

“They’re not gone yet,” Kelly said. “If they wanted to do something, they could do it.”

The GOP tax plan also included bipartisan ideas for reducing taxes on homes, groceries and Social Security income. But Kelly called the GOP’s income tax proposal “reckless and unreasonable,” predicting it would tank the budget in future years.

The governor floated two alternatives. The first was a $450 income tax rebate for each Kansas individual filer, which Republican leaders dismissed as a gimmick. The second was a broader plan for $1.1 billion in cuts over the next three years, but aides said top GOP lawmakers never saw it.

Kelly’s office also released state data showing how the GOP’s income tax cuts would affect broad classes of taxpayers differently.

Those with incomes between $50,000 and $100,000 would have seen a cut of less than 5%, while those with incomes of more than $250,000 would have seen a larger decrease, nearly 11%.

The difference in average dollars saved each year was even starker: $122 versus $3,084.

“It was Brownback 2.0,” said state Rep. Tom Sawyer of Wichita, the top Democrat on the House tax committee. “It wasn’t sustainable — and the middle class got nothing.”

Republicans pushed back using the same data. The largest group of filers, individuals earning $25,000 or less per year, would have saved an average of $45 a year, but that represented 98% of their burden.

“The majority of the people that would have benefitted from that bill are low-to-middle- income Kansans individuals and families,” said Senate tax committee Chair Caryn Tyson, a Republican from rural eastern Kansas.

Sen. Rob Olson didn’t see it that way — at least not the second time the Kansas City-area Republican looked at the GOP plan this week.

Explaining himself publicly on the Senate floor Thursday, Olson said he had talked to his wife, come to the Statehouse early that morning and run some numbers.

“I just don’t think we did enough for people at the bottom,” he said.

The Senate voted on overriding Kelly’s veto Wednesday, and the tally was 26-14, one short of the two-thirds majority needed to prevail. Olson was a “yes.”

The Legislature’s rules allow any final action to be reconsidered, so the Senate had a second vote Thursday. A GOP colleague, Wichita-area Republican Carolyn McGinn, a former budget committee chair who voted “no” on overriding Kelly, was ready to vote “yes.” She said she’d done calculations showing she no longer needed to fear future budget problems.

Olson’s switch doomed the bill. About 30 minutes later, Senate President Ty Masterson announced he had removed Olson as chair of the Senate Utilities Committee.

Last year, during an internal GOP fight over redrawing the state’s congressional districts, Masterson, another Wichita-area Republican, stripped three other Republican senators of some committee assignments.

As for Olson, he said Friday, “I found him in a position where I couldn’t trust him.”

Olson shrugged off the loss of position, suggesting legislative leaders are asserting more control and making the legislative process less open than in the past.

“I’ve got more time on my hands to get creative,” he added.

Meanwhile, Kelly and Republican leaders are pointing fingers. Smith argues Kelly should have known there wouldn’t be another tax plan after the GOP’s bill.

But Kelly told reporters, “I’m not going to take any blame for the lack of tax cuts this year.”

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