Kansas Gov. Kelly vetoes Republican plan for flat income tax, setting up override fight
Kansas Gov. Laura Kelly vetoed the Legislature’s plan for a flat income tax Monday, arguing it could rapidly bankrupt the state if implemented.
Kelly announced her veto during an event at an elementary school Monday morning, blasting the proposal as regressive and warning that “there is no doubt that public schools would be the first to take a hit should this bill become law.”
In rejecting the 5.15% flat tax, Kelly said no to an expansive tax package that included parts of her own tax agenda — the elimination of the food sales tax on Jan. 1 and reduced taxes on Social Security income for seniors.
The Democratic governor has sought the immediate elimination of the food sales tax since before her reelection bid. The bill wouldn’t have granted the immediate elimination Kelly has sought but rather it would have accelerated the planned elimination from 2025 to 2024.
The Legislature’s tax plan in its entirety would have cost the state roughly $480 million once fully implemented. The flat tax portion alone was expected to cost around $332 million annually with the bulk of the cost coming from reduced taxes for higher income Kansans.
Repeating a refrain often she has often repeated throughout her tenure as governor Kelly said the implementation of the policy would return Kansas to budget shortfalls seen under former Republican Gov. Sam Brownback.
“Any tax cut we pass needs to be sustainable,” she said.
During her press conference rejecting the bill, Kelly proposed an alternative, a one-time $450 rebate for all Kansas taxpayers. The proposal mirrored a similar idea Kelly put forward for $250 rebates last year.
Though the proposal failed to gain traction last year, Kelly said she hoped lawmakers would consider it since it is not an election year.
Kansas’ annual revenue estimates for fiscal years 2023 and 2024 were increased last week by about 1%, just over $237 million, but Kelly’s administration warned that didn’t signal the state could afford long term dramatic cuts like a flat tax.
“Our focus the entire time is looking toward fiscal 27 and 28 and beyond and looking for structural balance,” said Kelly’s Director of Administration Adam Proffitt during a briefing on the estimates.
“To look at an ending balance at one point in time and assume you have enough money to cover expenditures five years from now is like looking at your bank account on payday and forgetting you have to pay your mortgage next month.”
Kelly’s veto sets up a tough override fight with the GOP-controlled Legislature that has made implementing a flat tax this year a top priority.
When the House voted on the bill earlier this month, it had a veto-proof majority of 85 votes split mostly along party lines with just one Democrat, Kansas City freshman Rep. Marvin Robinson, voting yes with Republicans.
The Senate fell three votes short of a veto-proof majority but three Republican senators, Chase Blasi, Caroyln McGinn and Tim Shallenburger, were absent for the late night vote. Shallenburger and Blasi both previously voted in favor of a 4.95% flat tax, while McGinn, a moderate, voted against the policy earlier this year.
McGinn said Monday she was unsure how she’d vote in the override attempt and would be focused on fairness for all taxpayers.
“I’m a bit concerned about the out years and just want to make sure we don’t take too big of a bite and have the same problem we had in 2012,” she said. The current version of the bill, she said, is better than the flat tax policy she voted against earlier this year.
Lawmakers return to Topeka Wednesday to begin the annual wrap-up session and consider Kelly’s vetoes. House Speaker Dan Hawkins, a Wichita Republican, pledged to override the governor.
“In these times of economic uncertainty when Kansans need tax relief more than ever, it’s especially careless and out-of-touch for Governor Kelly to veto this broad, sustainable tax policy that provides tax relief to ALL Kansans,” Hawkins said in a statement.
Republican supporters have argued the flat tax will accelerate Kansas’ economy by creating a simpler tax system that draws businesses to the state.
Alan Cobb, president of the Kansas Chamber of Commerce, said the flat rate was a “no brainer” after years of budget surpluses.
“Governor Kelly vetoed tax changes in 2019, 2020, and 2021, saying those proposals would destroy the state’s budget. They didn’t. And this plan won’t either,” he said in a statement following the veto.
But Democrats say it unfairly prioritizes tax cuts for high earners over low earners.
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.
Under Kansas’ current income tax brackets those earning less than $15,000 pay 3.1%, those making between $15,000 and $30,000 pay 5.25% and all other earners pay 5.7%.
“Any bill that gives a majority of its tax cuts to the wealthiest Kansans deserves to be vetoed,” said John Wilson, president of Kansas Action for Children, a group which advocates for policies that benefit low-income families.
This story was originally published April 24, 2023 at 9:02 AM with the headline "Kansas Gov. Kelly vetoes Republican plan for flat income tax, setting up override fight."
