Gov. Laura Kelly issued her first veto Monday, for a bill that could affect the income taxes or grocery bills of nearly every Kansan.
The GOP-controlled Legislature must now decide whether to try to override the Democratic governor’s veto. Votes during passage of the bill fell short of what would be needed for an override.
Kelly compared Senate Bill 22 to former Gov. Sam Brownback’s 2012 tax cuts, which led to years of budget turmoil. The current bill would prevent the state from collecting $500 million over three years.
“I refuse to endorse another round of fiscally reckless policies similar to those that left us in a mess my team is working so hard to clean up,” she said. “The days of unbalanced budgets and mismanagement are over.”
Republicans say Senate Bill 22 would stop taxpayers from owing more on their state taxes because of changes in federal tax laws. Rather than being a tax cut, the bill would prevent a tax increase, they contend.
With the veto, Kelly “broke her campaign promise of no new taxes and her commitment to decrease the sales tax on food,” said Senate President Susan Wagle, R-Wichita, in a statement. “Hardworking Kansans know how to best spend their money and more of it should stay in their own pockets.”
Nearly half of the bill’s cost 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.
The bill would allow taxpayers to itemize their state taxes even if they don’t itemize at the federal level, at a cost of about $170 million in revenue over three years, according to the Kansas Department of Revenue. Because of a mismatch between federal and state tax law, Kansans now can’t itemize their state income taxes unless they itemize federal taxes.
The bill 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. It has among the highest tax rates on food in the country.
Kelly, who took office in January, said she remains committed to lowering the food sales tax during her first term.
The veto offers the biggest test yet of Kelly’s political muscle.
Within minutes of Kelly’s announcement, the Kansas Chamber of Commerce called on lawmakers to override the veto.
If Kansas doesn’t decouple from recent federal tax changes, Kansas “will be in an extremely uncompetitive position compared to nearly every other U.S. state, including our neighboring states, by electing to start taxing foreign income,” said chamber president and CEO Alan Cobb, who is considering a run for U.S. Senate in 2020.
Kansas Action for Children, which opposes the bill, said the veto was “about our priorities and values as a state.”
Referring to 2017, when lawmakers ended Brownback’s tax cuts, Kansas Action for Children president and CEO Annie McKay said. “They put the needs of our state ahead of ideology. Today, Gov. Laura Kelly was faced with a similar decision: Prioritize the needs of corporations or kids?”
Kelly said in her veto message that she wants to keep the state’s tax burden as low as possible. But she said “we must be patient, thoughtful, and prudent as we evaluate tax policy.”
Supporters of the bill will need to find more votes to override the veto — at least 27 in the Senate and 84 in the House. The Senate passed the bill 24-16 and the House approved it 76-43.
“I don’t think the votes are there,” Rep. Cindy Holscher, D-Olathe, said.
A veto override attempt would begin in the Senate. Even if senators override the veto, bill supporters would face a steep challenge in the House, according to Rep. J.R. Claeys, a Salina Republican who supports the bill.
“It’s possible if Republicans stick together,” Claeys said. “It’s probably one of the toughest overrides that we’ve seen.”
Since the start of session, Republicans have made clear the tax bill is one of their biggest priorities.
Wagle, who is considering a 2020 U.S. Senate bid, created a new committee to consider the bill and made herself its chairwoman. It was an extraordinary step to take for a single piece of legislation.
Kelly has said she’s open to considering tax changes in the future after the state budget has further stabilized and Kansas has a better picture of how much revenue it expects to collect.