Kansas lawmakers end session, but Laura Kelly vows to veto tax cuts and call special session

Kansas lawmaker adjourned their legislative session early Wednesday morning after passing a major tax cut package, but Gov. Laura Kelly is vowing to veto the plan and call legislators back to Topeka for a special session.

Senate Bill 37 passed the House 108-11 and the Senate 25-9 on the last day of the legislative session. The collection of cuts to income taxes, property taxes and sales taxes was the latest attempt to find a tax cut plan that appeased legislators of both parties in both chambers plus the governor.

The bipartisan attempt at having substantive tax cuts in an election year will likely be a failure.

"It's unacceptable," said Will Lawrence, the governor's chief of staff. "The governor's not going to sign it. She will veto it. We will be in a special session."

He said the special session would be within the month.

"When do you not say that she's being a bit of a dictator when you have bipartisan supermajorities repeatedly sending her tax cuts?" said Senate President Ty Masterson, R-Andover.

It is also unclear whether any deal could be reached during a special session that is more amenable to the parties.

"We believe what we have right now is as close to what she wants as we're going to get right now," said House Speaker Dan Hawkins, R-Wichita.

A special session wouldn't be confined to just tax cuts, meaning that lawmakers could potentially take up other legislation, including a failed effort this week to enhance a government subsidy program to try to get the Kansas City Chiefs to move to Kansas.

"If we come back to deal with the issues that she's failed, if she vetoes anything that we passed it just gives us a new opportunity to take another swing at it," Masterson said.

After previous failures to find agreement on tax cuts, top Republicans spent the waning hours of the session trying out a series of tweaks to the last tax plan that the governor vetoed.

When she vetoed House Bill 2036, Kelly said it was "too expensive" because the projected cost was $469 million a year by fiscal year 2029. She proposed her own plan that was $433 million a year by 2029.

Rep. Adam Smith, R-Weskan and chair of the tax committee, contends, "We could probably make a $500-$600 million tax cut sustainable as long as we manage the budget."

The price tag on the new plan in SB 37 is $436 million a year by 2029.

"We made a good faith effort to get the numbers down and still put together a good tax bill," said Rep. Tom Sawyer, D-Wichita, and the ranking Democrat on the tax committee.

While Republicans and Democrats in the House focused on the $3 million difference between the plans, Lawrence said the problem is that legislators have passed multiple bills with tax cuts, and Kelly is looking at the total cost of all of them together.

"I would say the governor is moving the goalposts, again, which is what's been happening all session," Hawkins said.

A state general fund profile produced by the Kansas Legislative Research Department at the request of Senate Democrats based on projections for various pieces of legislation showed the ending balance of the state general fund would drop from $2.6 billion at the end of the current fiscal year to $2.7 million at the end of fiscal year 2028.

"That is fake math," Lawrence said of Republicans pointing to the slim difference between the main tax cut bills. "You have to look at all this stuff. They just want to ignore the profile. That's fine, but the governor is not going to do that because she believes we probably need more than $2.7 million in FY 28, given that this profile doesn't count any additional expenditures for K-12 education, no more money for special ed."

Masterson said Republicans have different budget profiles built on different assumptions.

"We show $800 million in the bank, and not counting the $1.9 (billion) in the rainy day fund," he said.

What is in the tax cut plan?

SB 37 mirrors many of the provisions that failed to overcome a veto just a day before but changes the taxation rate for income taxes. If enacted, it would do the following:

• Restructure the three-bracket tax system to two brackets, taxing the lower bracket at a 5.2% rate and the higher bracket at a 5.55% rate. For individuals, the first bracket would be all income from $0-$23,000, and the second bracket include all further income.

• Exempts all Social Security benefits from state income tax. Currently social security is only exempt if adjusted gross income is under $75,000, but once earning more all social security income is taxed.

• Increase the standard deduction by 3%, which would exempt income up to $3,605 from taxation for an individual.

• Increase personal exemptions from $2,250 to $9,160 with an additional $2,320 per dependent.

• Reduce the privilege tax banks pay to align with corporate tax rates.

• Abolish the Local Ad Valorem Tax Reduction Fund and County and City Revenue Sharing Fund — which have been unfunded for years.

• Exempt the first $100,000 of appraised property value from the statewide school finance levy and reduce it from 20 mills to 19.5 mills.

• Eliminate sales tax on groceries.

How did Topeka legislators vote?

Here's how Topeka legislators voted on the tax cut bill:

Yea: Republican Sens. Brenda Dietrich and Rick Kloos; Republican Reps. Jesse Borjon, Ken Corbet and Kyle McNorton; and Democratic Reps. John Alcala, Vic Miller and Virgil Weigel.

Nay: Democratic Reps. Kirk Haskins and Tobias Schlingensiepen.

Absent: Republican Sen. Kristen O'Shea.

This article originally appeared on Topeka Capital-Journal: Laura Kelly will veto tax cuts passed by Kansas lawmakers on Wednesday