Kansas Legislature sends flat tax, food sales tax elimination to Democratic Gov. Kelly

Kansas lawmakers have sent to Democratic Gov. Laura Kelly’s desk a bill to establish a flat income tax and eliminate the state food sales tax a year early.

The Kansas House voted 85 to 38 and the Senate voted 24 to 13 early Friday to send a tax package to Kelly that establishes a flat income tax of 5.15% for individuals.

The bill taxes any income above $6,150 for individuals and $12,300 for married couples.

Under current law, the food sales tax will be eliminated on Jan. 1 of 2025. The bill moves that elimination up a single year to 2024. The full package will cost roughly $485 million annually once it is fully implemented.

The House earned enough votes to override a veto from Kelly while the Senate fell three votes short.

Kelly, who took office after the repeal of former Republican Gov. Sam Brownback’s income tax cuts following years of budget shortfalls, is unlikely to sign the bill. Speaking to reporters at an event in Olathe Wednesday, Kelly indicated she would reject any version of a flat tax - even as numerous Democrats in the House voted in favor of a bill with a 5.25% rate.

She said it would remove the state’s ability to take any other tax relief actions.

“I have looked at the numbers and I have yet to come up with a flat tax that is sustainable over time,” Kelly said.

Kelly has sought the immediate elimination of the food sales cut for more than a year. Last year Republicans opted to implement the phase in rather than an immediate cut and the governor campaigned last year on giving Kansans an immediate cut if she was reelected.

The vote came after two back to back debates late Thursday night and early Friday morning.

Advocates of the flat tax argue it simplifies the tax system for Kansans, offering a tax cut to everyone.

“States that are doing well fiscally have lower income tax and single brackets,” said Sen. Caryn Tyson, a Parker Republican. “It just makes sense.”

But the policy ultimately provides a far larger cut to wealthier Kansans than it does to low income taxpayers.

According to an analysis from the Kansas Department of Revenue, the bill would provide around $3,000 in annual tax cuts to Kansas’ highest earners while Kansas’ lowest earners would receive less than $50 annually in tax cuts.

The flat tax alone is expected to cost the state about $318 million annually once it is fully implemented.

Rep. Tom Sawyer, a Wichita Democrat, argued that package as a whole was too expensive for the state and prioritized high earners over the average Kansan.

“I can’t support this bill,” Sawyer said.

Rep. Adam Smith, a Weskan Republican who chairs the House Tax committee, said Sawyer was correct that the bill would help high income Kansans more than low income Kansans.

He urged his colleagues to support the policy regardless, pointing to an increase in the overall standard deduction for all taxpayers included in the bill.

The bill also accelerates a planned corporate tax cut that comes as a result of Kansas using a new incentive program to lure Panasonic and Integra Technologies to start major business developments in the state.

The bill reduces Social Security tax for retirees and includes a provision that would gradually reduce the tax over time. The Social Security decrease had been part of Kelly’s tax plan alongside an immediate elimination of the food sales tax. and sales tax on diapers and feminine hygiene products.

House Speaker Dan Hawkins, a Wichita Republican, applauded the package as a good use of the state’s surplus funds. But during House GOP caucus meeting, he acknowledged that a veto was likely.

“Our governor’s not going to sign any flat tax, she’s told us that,” Hawkins told GOP lawmakers. “Our task was to find a package that we could all agree on and keep our votes together.”

House Minority Leader Vic Miller, a Topeka Democrat, said he had voted for an earlier version of the flat tax because he thought it was the best possible bill. The final package, he said, he could not support.

The overwhelming majority of Democrats voted against the bill citing the cost.

“This just hearkens back to the good old Sam days,” said Sen. Tom Holland, a Baldwin City Democrat, referencing Brownback.

The Star’s Jonathan Shorman contributed reporting.

This story was originally published April 7, 2023 at 3:31 AM.