Kansas Gov. Kelly pledges to veto flat tax passed by Republicans. What happens next?
The Republican-controlled Kansas Legislature on Thursday passed a tax package setting a single income tax rate. Democratic Gov. Laura Kelly has pledged to veto it.
What comes next?
Top Republican lawmakers quickly accomplished a signature goal for the annual legislative session by passing a flat tax – and prompting a Kelly veto that Republicans can use to hammer Democratic candidates in the fall.
For Kelly, the GOP-led package, which would set a 5.25% income tax rate, gives the second-term governor the opportunity to cast GOP leaders as irresponsible and invoke the dark memory of budget woes under Republican Gov. Sam Brownback ahead of every Kansas House and Senate seat appearing on the ballot later this year.
The House appears to have a veto proof majority. But in the Senate, two Republican senators and a conservative independent senator oppose the flat tax package, making it unlikely the bill’s supporters will be able to override Kelly’s anticipated veto. The question then becomes whether the skirmish leads to productive negotiations over taxes – or more sustained vetoes.
Senate President Ty Masterson, an Andover Republican, said he believed the best pathway to approving a flat tax this year is convincing Democratic senators to break with Kelly, who calls a flat tax a “non-starter.”
“If she remains unwilling to compromise I’m not optimistic about getting out of this session with any tax relief,” Masterson said, explaining that he viewed a single-rate tax as the one compromise left because he believed other components of the bill were compromises from GOP positions.
The bill, which would cost over $1.6 billion over three years according to legislative researchers, taxes any income above $6,150 for individuals and $12,300 for married couples at 5.25% while increasing personal exemption on taxes and linking it and the standard deduction to inflation. It also includes several elements Kelly included in her tax package — the elimination of the food sales tax on April 1, the elimination of income tax on Social Security and a $100,000 exemption on state property taxes.
Kelly vetoed a similar bill, with a lower flat tax rate, last year. She has consistently said since that she would oppose any tax package that included a single-rate income tax. Currently, Kansas has three income tax brackets.
In a joint statement, House and Senate Republican leaders called for Kelly to sign the bill, which they said would allow for sustainable economic growth.
Kelly had already said she would veto the bill in an interview Thursday morning with conservative radio host Pete Mundo.
“I will veto it and then we will move on and hopefully discuss the bipartisan tax plan that I introduced last week,” Kelly said. She added that she would look at other tax cut proposals from Republicans but said any flat tax was “dead on arrival.”
Kelly’s plan combines several tax policies introduced by Republicans and Democrats over the years and some included in the bill she vetoed last year. The plan, which would cost $1.1 billion over three years, would also eliminate the sales tax on diapers and feminine hygiene products and increase the state’s child care tax credit.
The GOP plan would lead to a $514 million budget shortfall by 2029, according to budget projections provided by Kelly’s budget office. Kelly’s plan, the projections say, would still shrink the state’s budget but would not create a shortfall.
Masterson said Kelly’s projections incorrectly assumed lawmakers would accept her budget proposals.
“We do not dispute that if the governor anticipates continuing to act like Joe Biden and spend like a drunken sailor, that would eventually spend away our surpluses,” Masterson said in a statement. “However, if the state engages in basic fiscal responsibility, there will continue to be ample money available to deliver ongoing and meaningful tax reductions to Kansans.”
Kelly and her allies say the flat tax will wreck the state’s budget while disproportionately benefiting the wealthiest Kansans and leaving middle class residents behind.
“The public is the reason we have a progressive income tax,” House Minority Leader Vic Miller, a Topeka Democrat, said. “The overwhelming percentage of people in this state support people making over a quarter million dollars paying a different rate than those who don’t.”
But Republicans argue the flat tax will improve Kansas’ economy while drawing new residents and businesses. Arguments about who would benefit the most, some proponents said, amounted to “class warfare.”
Rep. Adam Smith, a Weskan Republican, said the income tax should be treated like all other taxes that are applied uniformly regardless of income.
“I can’t think of a more simple tax code, and if you disagree I’d like to ask you, this single rate of tax concept is OK for sales and property taxes, why is it not ok for income tax?” Smith said.
With more than $1 billion in budget surplus and after high inflation during the last couple years, lawmakers in both parties have framed tax cuts as necessary relief. Pressure to deliver in an election could eventually bring GOP leaders to the negotiating table with Kelly.
While the current bill seems likely to fail, Rep. Ken Rahjes, an Agra Republican, said he wasn’t concerned yet that the legislative session would end without tax cuts. When he spoke to constituents, he said, they were excited about property tax relief, not a flat tax.
“The flat tax issue, much like some of her (the governor’s) wants – it’s still early in the session,” Rahjes, who voted for GOP the bill, said. “This is maybe a good test if you want to get started.”
Sen. Dennis Pyle, a Hiawatha independent, and Sen. Rob Olson, an Olathe Republican, delivered key no votes against the bill and said after the vote that there was no version of a flat tax they would support.
“This key piece when we go back — you don’t have the votes,” Pyle said on the Senate floor.
“At some point in session you’re going to come to the realization that if we want tax relief for the people of Kansas we’re gonna have to come and look at what the governor’s proposing.”
This story was originally published January 18, 2024 at 12:31 PM.
