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Kansas Republicans are moving swiftly to send a tax package with a single income tax rate to Democratic Gov. Laura Kelly by the end of week, setting the stage for an early session veto.
The Republican plan features several elements the governor also incorporated into her own proposal, such as the immediate elimination of the food sales tax, an increased standard deduction and the elimination of state income tax on Social Security.
But Kelly remains certain to veto the proposal because it flattens the state’s income tax brackets into one rate of 5.25%.
House and Senate negotiators finalized the tax package on Tuesday. Top GOP lawmakers plan to bring the legislation up for votes later this week – a rapid pace for the typically sleepy early days of the annual legislative session.
Republican leaders cast the policy as a compromise that includes both ideas Republicans have sought for years and items the second-term Democratic governor supports.
“We put together a plan that really has all the tenets they pushed forward, which, quite frankly, are the same tenets we pushed forward multiple times and we’ll see if the governor is ready to compromise,” Senate President Ty Masterson, an Andover Republican, said.
The centerpiece of the proposal is a 5.25% flat income tax that exempts all income at or under $6,150 for individuals and $12,300 for couples. Proponents described that structure as a single-rate income tax, also often called a flat tax because all Kansans paying income tax will pay the same state rate.
A flat income tax has been a key priority of GOP leaders for the past two years. They argue the tax structure is fair for all Kansans and draws new residents and employers to the state. Current Kansas law includes three income tax brackets.
While eliminating state income taxes on Social Security, the GOP plan ties the standard deduction to inflation and also raises the personal tax exemption for Kansans. Under the plan, the food sales tax would end in July instead of January under current law. The bill also lowers the privilege tax rate, paid by banks and financial institutions, to match recent corporate income tax reductions.
The legislation is estimated to cost $337.9 million in tax revenue in its first year and more than $468 million in subsequent years, according to estimates compiled by legislative researchers. Over the next three years, the plan would cost nearly $1.3 billion, about $200 million higher than the estimated $1.1 billion price tag on Kelly’s plan in the same amount of time.
“This is a simplified tax code, it allows her to easily come on board,” Sen. Caryn Tyson, a Parker Republican and chair of the Senate Assessment and Taxation Committee, said. “It is tax relief right away.”
Kelly has pledged to oppose any bill that includes a flat tax, arguing the cuts are financially irresponsible for the state and disproportionately benefit the wealthiest Kansans. In a statement on Tuesday, Kelly spokeswoman Brianna Johnson painted the governor’s plan as the responsible option.
“It benefits working, middle-class Kansans, while the tax plan rolled out today mostly benefits Kansans at the top,” Johnson said. “Kansans have seen reckless tax experiments that hurt our schools, roads, and economy before, and they don’t want to go back.”
The governor likely has the support needed to block Republicans from overriding a veto.. Kelly announced her tax cut plan with the support of two Republican senators and an independent. Republicans will almost certainly need to either win back the support of those lawmakers or convince Democrats to vote with them if they want to summon the two-thirds majorities in the House and Senate needed to override a veto.
Democratic support may not be impossible. Last year, several Democrats voted to support an early version of the flat tax plan that also set the rate at 5.25%.
But Rep. Tom Sawyer, a Wichita Democrat who voted for the flat tax last year, said the current proposal was too tilted toward supporting wealthy Kansans.
“If they really wanted Democratic support you’d think they would have at least moved food sales tax to April, would have done some more on the bottom,” Sawyer said. “It didn’t seem like they reached out much to Democrats on this.”
Even if this plan does not become law, the proposal is expected to be just the first skirmish in a fight over taxes that could last months.
House Speaker Dan Hawkins, a Wichita Republican, predicted earlier this month that Republicans may not initially get the needed votes on a tax plan, but insisted that a flat tax would be part of a final package.
“I think we do have to have that first vote on both sides, we’ll see where the votes are and then it will go to the governor,” Hawkins said. “If we can’t get the two thirds then we sit down with our folks and find out what it’s going to take to get there.”