Kansas Gov. Laura Kelly prevails in tax cut showdown as veto override fails by one vote

Kansas Democratic Gov. Laura Kelly prevailed on Monday in a showdown with the Legislature over tax cuts, as supporters failed by a single vote to enact a vetoed plan she warned was too expensive.

The plan’s failure threw into doubt the chances for tax cuts this year. The Legislature was expected to end its annual session later this week, but Kelly has promised to call lawmakers into special session if they don’t approve tax relief she is willing to sign.

The Senate voted 26-14 on the override – one vote short of the 27 needed. The vote came after the House easily passed the override 104-15 on Friday.

Support for the measure cut across partisan lines, with many Democrats in the House joining with Republicans to advance the override. But the measure ran into trouble in the Senate, with Sen. Dennis Pyle, a Hiawatha Republican who previously supported the plan, voting against overturning the veto.

“I’m just telling the people of Kansas, this isn’t over. Don’t let anyone tell you that if this fails, that’s it over. It’s not over,” Pyle said.

Republican leaders were uncertain what the next steps on taxes would be after the vote. Senate President Ty Masterson, an Andover Republican, said no time was left to pull together a bill this week because lawmakers plan to adjourn Tuesday.

“Really, at this point, nothing’s off the table,” Masterson said. “I’m incredibly disappointed that, you know, you can have one person make a decision like that.”

The plan would have set the top state income tax bracket at 5.55% and 5.15% for the bottom bracket, with $23,000 taxable annual income serving as the dividing line between the two rates. For married couples, that dividing line would be $46,000.

The personal exemption allowance amount would have increased so that each dependent would qualify for an additional $2,320 while raising the allowance from $2,250 for all taxpayers to $18,320 for married couples and $9,160 for all other taxpayers.

The measure would have also eliminated taxes on Social Security income, lowered the statewide mill levy for schools from 20 mills to 19.5 mills, and accelerated the elimination of the state sales tax on food to July 1, six months ahead of current law.

Lawmakers and Kelly have been united in promising to deliver tax relief in an election year that will decide whether Republicans continue to hold veto-proof majorities in the House and Senate. But supporters of the tax package clashed with Kelly over the cost of the measure as Kelly warned it risked the state’s financial security.

The annual cost to state revenues under the plan is estimated at $635 million the first year and roughly $460 million each year after. Kelly had generally held that the annual ongoing cost of tax cuts shouldn’t exceed $425 million.

“It is time to return money to the taxpayers, the hardworking men and women who earned it,” said Sen. Caryn Tyson, a Parker Republican who chairs the Senate Tax Committee.

The proposed tax cuts prompted memories of former Republican Gov. Sam Brownback’s signature income tax cuts – and the budget crisis that followed – remain in the mind of lawmakers and Kelly. The Legislature largely rolled back the tax cuts in 2017 and Kelly first won the election as governor in 2018 on promises to strengthen the state’s fiscal health.

“I appreciate that the Kansas Senate has prioritized our state’s future fiscal stability by upholding my veto. As I’ve said before, Kansans need meaningful sales, property, and income tax relief, but we must ensure any tax relief is responsible and sustainable,” Kelly said in a statement.

“Now, I urge the legislature to consider the alternative tax cuts package I proposed last week to ensure that Kansans get the relief they desperately need.”

Before the vote, Kelly told reporters that overriding the veto would have threatened the state’s ability to sustain its current level of services over the long term.

Some Republicans had discounted the significance of the roughly $35 million annual difference between Kelly’s plan and the Legislature’s plan, but critics of the measure noted that the amount quickly adds up to upwards of $100 million in just three years. Kelly on Monday also emphasized that other, smaller tax measures passed by lawmakers also contribute to a larger annual total.

In vetoing the measure, Kelly had urged lawmakers to instead adopt an alternative plan.

“It would sure be nice if Gov. Kelly was the same fiscal hawk when it came to the budget that she tries to be when it comes to tax relief,” said Rep. Adam Smith, a Weskan Republican who chairs the House Tax Committee.

State officials recently released revenue projections that show Kansas is expected to collect $146 million – or 1.4% – more than previously anticipated during the next fiscal year, which begins in July. While officials now expect the state to collect about $100 million less during the current fiscal year than previously projected, collections are still expected to surpass the previous year by nearly 10%.

Legislative researchers estimated that with the tax package, Kansas would have ended the next fiscal year with a $1.9 billion ending balance and an additional $1.7 billion in a rainy day fund. Still, the state would run a $705 million deficit for the year, according to estimates.

Democrats opposed to the measure warned their fellow lawmakers that the Legislature is plunging ahead with tax cuts without a long-term plan. As the state’s cash reserves are spent down, lawmakers would have lacked the will to control spending, they warned.

“There is just no willingness in this body to cut spending,” Sen. Ethan Corson, a Fairway Democrat, said.

Not every Republican supported the measure. Sen. Rob Olson, an Olathe Republican who isn’t running for reelection, slammed the plan in a floor speech that suggested a plan put forward by Senate Democrats was better. He also chided Republican leaders for bundling several tax items together instead of passing popular items piecemeal.

“I’m tired of the trickle-down economics. It doesn’t work,” Olson said.

While several components in the package enjoy wide support, such as ending taxes on Social Security income, lawmakers were sharply divided this year over income taxes. Republican leaders had entered the 2024 session in January determined to enact a flat tax – setting a single state income tax for all taxpayers – that Kelly and Democrats opposed.

When the Legislature passed a flat tax, Kelly vetoed it. Bill supporters were unable to override the veto, setting the stage for negotiations on a compromise that had Kelly’s support.

Kelly and Republican leaders then struck a deal that would have cut taxes for those making more than $30,000 a year in taxable income. But the House rejected the measure, in part because of concerns it did not provide a rate cut for lower-income earners.

The plan that eventually passed initially had unanimous support in the House, but Democrats split after Kelly vetoed the plan with some supporting the veto and others voting to override it.