Gov. Laura Kelly may soon issue her first veto, after Republican lawmakers passed a signature plan aimed at lowering tax bills. It would keep Kansas from collecting $500 million in revenue over three years.
The proposal – Senate Bill 22 – would affect nearly every Kansan. It could alter how much you owe in income taxes and slightly cut the food sales tax rate you pay at the grocery store.
Lawmakers passed the bill in response to changes in the federal tax code that could mean millions in additional revenue for Kansas. Kelly has warned lawmakers not to change taxes this year as she seeks to stabilize state government.
Republicans say the situation is like finding a wallet on the ground full of cash. They say taxpayers should keep the money.
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“People really want, they really want that money back,” Rep. Kyle Hoffman, R-Coldwater, said.
Kelly appeared to all but promise a veto.
“Senate Bill 22 will absolutely (undo) all the progress we’ve made,” she said in a statement. “It will put our state once again in a self-inflicted budget crisis forcing hardships on our schools, our highway program, our most vulnerable children and our economy. The State of Kansas cannot afford to go backwards.”
Senate President Susan Wagle, R-Wichita, had pushed for the legislation throughout the session. She created a committee and named herself its chairwoman in order to advance the bill.
“This bill keeps companies, families and individuals in business,” Wagle said. “A vote against this bill is a vote for a tax increase.”
Lawmakers could try to override a veto and force the bill into law. But they would need more votes than they have right now.
The Senate passed the bill 24-16 on Thursday. The House approved it 76-43 earlier this month.
To override a veto, 27 votes are needed in the Senate and 84 in the House.
Gov. Sam Brownback’s infamous 2012 income tax cuts have hung over debate about the bill. Democrats have warned it could return Kansas to the days of budget cuts.
“It is bad public policy. There is no reason to repeat the mistakes of the past,” Senate Minority Anthony Hensley, D-Topeka, said.
Kelly said her administration has begun repairing “the severe damage done” during the Brownback years and this bill could threaten that effort.
“Our recovery is tenuous; our budget is fragile,” she said.
Wagle said Senate Bill 22 is nothing like the Brownback tax cuts.
“It’s absolutely absurd to compare this bill to the Brownback tax cuts,” she said.
The bill would keep Kansas from collecting roughly $500 million over the next three years. Nearly half of that is the result of business income tax changes, including changes allowing multinational corporations to bring profits earned overseas back to the state without having them taxed as income.
Democrats call those changes a tax giveaway for large corporations. Sen. Vic Miller, D-Topeka, said the public won’t support the bill.
“They understand what’s going on. When the governor vetoes it, it will be crystal clear,” Miller said.
The bill would allow taxpayers to itemize their state taxes even if they don’t itemize at the federal level. Because of the mismatch between federal and state tax law, Kansans now can’t itemize their state income taxes unless they itemize federal taxes. In effect, that means some people are paying a larger state tax bill this year.
Allowing individuals to itemize would cost Kansas about $170 million in revenue over three years, according to estimates from the Kansas Department of Revenue.
The bill also reduces the sales tax rate on food from 6.5 percent to 5.5 percent beginning in October. Kansas is one of only about a dozen states that tax food.
The current tax rate on food is the second highest in the country. That doesn’t include additional local taxes that can drive the tax rate on food higher than 10 percent in some places in Kansas.
“I’ve long supported a food sales tax reduction, but it should not be considered in Senate Bill 22, a bill that’s simply meant to restore what taxpayers would otherwise lose,” Sen. Mary Pilcher-Cook, R-Shawnee, said as she voted against the bill.
Hensley said a better way to help people with food sales tax would be to revive a tax rebate program for people with lower incomes. The program was gutted under Brownback.