Top Republicans and the Democratic governor brokered a tax cut deal after Kansas’ Republican leaders abandoned a move to a single-rate personal income tax that the state’s Republican leaders and Democratic governor strongly opposed.
The Kansas House and Senate were scheduled to vote on the compromise on Thursday or Friday, and Gov. Laura Kelly was expected to sign it once it reaches her desk. The plan would save taxpayers about $1.4 billion over the next three years, but it is smaller than the separate plans approved by each chamber last month and vetoed by Kelly in the Republican-controlled Congress. This is smaller than the plan passed in January.
Republican leaders want to move Kansas from the current three tax rates to a single personal income tax rate and lower the top tax rate from the current 5.7%, which Kelly said would benefit the “ultra-wealthy.” Said to bring. Similar arguments blocked large tax cuts in 2023, when 12 other states lowered their income tax rates, according to the conservative Tax Foundation.
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The compromise would keep the three personal income tax rates in place, but reduce the top rate to 5.5%. Thanks to Republican defectors who have “tied themselves to the progressive tax tree,” as state Senate President Ty Masterson said Wednesday, Republican leadership overrode Kelly’s veto of the single tax proposal. failed to obtain the necessary two-thirds majority to do so. ”
“So, what do you know?” said Masterson, a Wichita-area Republican. “We just cut down the tree at the top and everything else is a win.”
The bill would also eliminate state income taxes on retirees’ Social Security benefits, which would start being taxed once they receive $75,000 a year. It also expands the state’s standard personal income tax credit, expands the earned income tax credit for child care costs, reduces the state’s property tax to fund public schools, and reduces the state’s already-expired grocery tax credit. The 2% sales tax will end six months early. July 1.
Kansas House Tax Committee Chairman Adam Smith watches the House vote at the State Capitol on April 3, 2024 in Topeka, Kansas. Smith said he didn’t know whether he would support the tax cut agreement brokered by Democratic Gov. Laura Kelly and Republican legislative leaders. (AP Photo/John Hannah)
Still, the final agreement sparked bipartisan dissatisfaction. Mr. Kelly’s office and Republican leaders worked out the plan behind closed doors and discussed some of it in public, instead of having the three House and Senate negotiators draft a plan.
House Taxation Committee Chairman Adam Smith said before both chambers voted that he didn’t know whether he would support the deal — even though it’s his job to explain it to his colleagues and he usually doesn’t. If that’s the case, he should push ahead with a plan supported by Republican leaders.
“I’m hearing a lot of opposition,” said Smith, a Republican from western Kansas. “I have to carry a bill and it sucks not knowing if I’m even going to vote on it.”
Republicans wanted tax cuts of $500 million to $600 million a year, or $1.5 billion to $1.8 billion over three years. The new plan, worth about $430 million a year, is less generous in increasing the standard deduction than the Senate’s plan, which raised the deduction to $22,000 for married couples to help low-income families.
Some councilors also said the new plan did not reduce property taxes enough, given rising house prices and local taxes. For a Kansas homeowner with a median value of $210,000, the annual savings would be about $140.
“To me, this doesn’t make sense,” said Northeast Kansas Sen. Tom Holland, who represented Democratic senators in tax negotiations. The number of monsters is increasing every year.
The Kansas deal comes two weeks after Georgia’s Republican-controlled Legislature passed individual and business tax cuts supported by Republican Gov. Brian Kemp. Like Georgia, Kansas has a large budget surplus, expected to be more than $4 billion by the end of June 2025.
But Kansas’ tax debate has been turbulent since the state’s nationally infamous income tax cut experiment in 2012 and 2013 under Republican Gov. Sam Brownback. Significant budget shortfalls continued until 2017, when a bipartisan legislative majority reversed most of the cuts, over Brownback’s objections.
Mr. Kelly won the first of his second term in 2018 against Mr. Brownback’s fiscal policies, and he still cites them when criticizing Republican proposals. She argued that the Republican plan, which she vetoed in January, was fiscally reckless.
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Republican leaders have repeatedly said they are not repeating the mistakes of 2012 and 2013 and that Kansas can sustain the proposed cuts because of its large surplus.
But Mr. Kelly’s veto could not be overridden, leaving little hope that the cuts would not pass this year. This year, all 40 state Senate seats and 125 state House seats are up for election.
“We have to get something, and this is a compromise,” said House Speaker Dan Hawkins, R-Wichita. “I have to finish it and get out of here.”
