Laura Kelly vetoes $1.5 billion in tax cuts for Kansans, calling it 'too expensive'

Gov. Laura Kelly vetoed the Legislature's large, bipartisan tax cut package on Wednesday, setting up a showdown over tax cuts in the waning days of the legislative session.

House Bill 2036 is a package of cuts to income taxes, property taxes and sales taxes totaling more than $1.5 billion in tax relief over the next three years.

But Kelly fears the price tag is too high, especially further into the future. She called it "too expensive."

"While I appreciate the bipartisan effort that went into this tax cut package and support many of the provisions included, I cannot sign into law a bill that jeopardizes our state's future fiscal stability," Kelly said in her veto message. "I have said repeatedly that I will do everything in my power to prevent our state from the fiscal mismanagement of the previous administration."

That's despite new revenue estimates released last week forecasting a stable economy and stable tax collections over the next two years. Those new estimates also predict a large budget surplus in the current fiscal year, with $2.7 billion in ending balance plus $1.7 billion in a rainy day fund.

"Knowing that we have a healthy fiscal outlook, with economic conditions continually putting more pressure on hardworking Kansans, this politically-motivated veto serves as a slap in the face to every single person in this state," House Majority Leader Chris Croft, R-Overland Park, said in a statement.

Kelly wants lawmakers to take up a new tax cut proposal she unveiled alongside her veto of HB 2036. Her plan would equate to $433 million in tax cuts per year, compared to the $520 million favored by legislators across multiple bills.

Republican leadership showed no interest in taking up Kelly's new plan. Instead, the Republican-led Legislature appears to have the votes necessary for bipartisan supermajorities to override the veto.

"We will work to override her veto and encourage our colleagues to ignore the governor's my-way-or-the-highway stance," Senate President Ty Masterson, R-Andover, said in a statement.

Veto session runs from Thursday through Tuesday, when the Legislature is scheduled to adjourn for the year.

House Speaker Dan Hawkins, R-Wichita, pointed to the bipartisan support for the bill and said, "We've all seen the revenue estimates that say this plan is sustainable."

"Kansans need and deserve tax relief and Governor Kelly isn't serious when she says she wants to provide it," Hawkins said. "As your elected representatives, we're going to work to override her veto and get your money back to you."

The package passed unanimously in the House. In the Senate, several members were absent or passed on the vote, but it had a clear path to a supermajority and had slim bipartisan support.

The tax cuts in HB 2036 are headlined by changing from three income tax brackets to two, which comes after Republicans failed to enact a single-rate flat tax over Kelly vetoes in 2023 and 2024.

That package also includes an elimination of state income taxes on Social Security benefits, a tax cut for financial institutions, an acceleration of the grocery food sales tax cut and cuts to a state property tax mill levy. It also repeals an unfunded state program designed to subsidize local property tax relief.

Kelly's new tax proposal is largely similar to HB 2036 and its previous iterations, but it would keep the state at three progressive income tax brackets.

"When working on any fiscal package, including tax cuts, legislators must consider the legislation's affordability beyond their next election," Kelly said. "The total fiscal impact of tax relief should stay within the tax plan I released with this veto. I encourage legislators to send me a tax package that gives Kansans the relief they desperately need while not putting the state on the path to bankruptcy. "

It is unclear whether Kelly's latest tax proposal will sway Democrats, particularly in the House, to vote to sustain her veto.

House Minority Leader Vic Miller, D-Topeka, previously said, "I can't in good conscience advise my members to vote to sustain (the veto) unless first they can present a plan to me that's better than the one we passed and give me some assurance that the other side will approve that plan."

The Legislature also has other bundles of tax cut proposals.

Kelly vetoed one of them, House Bill 2098, on Wednesday. That bill included a variety of sales tax cuts totaling $83.7 million over three years. Kelly said her veto was because the impact of the tax cuts is unclear "without knowing the total cost of all tax bills, including a fair, sustainable, and fiscally responsible tax relief package. "

Kelly vetoed another one, House Bill 2465, last week. That plan included controversial tax breaks opposed by Kelly that are designed to benefit anti-abortion counseling centers, also known as pregnancy resource centers.

Additional tax cut proposals exist in various conference committee reports that didn't pass before the Legislature adjourned for its April break but could be taken up during veto session. That includes House Bill 2096, which includes a controversial tax break designed to benefit Genesis Health Clubs and other businesses that a majority of Republican legislators view as competing against government.

Jason Alatidd is a Statehouse reporter for the Topeka Capital-Journal. He can be reached by email at jalatidd@gannett.com. Follow him on X @Jason_Alatidd.

This article originally appeared on Topeka Capital-Journal: Bipartisan $1.5 billion tax cut plan vetoed by Kansas Gov. Laura Kelly