Kansas Gov. Kelly’s ‘gut sense’ says recent tax proposal too expensive, unsustainable

Kansas Gov. Laura Kelly on Tuesday said her “gut sense” is that tax cuts passed recently by the Legislature are too expensive, but that she hasn’t made a final decision about a veto.

The package is estimated to cost approximately $635 million in state revenue during its first year and about $460 million in the following years. The Democratic governor has said she wants to limit costs to around $425 million annually.

Kelly told reporters on Tuesday the proposal had not yet reached her desk, but suggested the tax plan would prove too expensive and therefore unsustainable.

“I think what I said when it got passed, though, is that it’s a little out of the ballpark,” she said. “It’s too expensive, so I really need to take a look at that and have some serious conversations with my budget people.”

The governor added that she is waiting on new state revenue projections before making a final decision. Those estimates are expected to come later this week.

“That would be helpful obviously to see what the projections are,” Kelly said. “We had been riding high and beating the estimates all the time, but in the last 7 or 8 months, we’ve seen a downturn.

“Based on the estimates, we’re still in great shape, but we need to see if that’s a trend that estimates are going to be lower to feed into that sense that the package is too expensive and unsustainable,” Kelly continued.

The tax proposal passed in the Senate 24-9 and in the House 119-0 earlier this month. Lawmakers passed the plan one day after a tax package with both the Senate and Kelly’s backing failed in the House. That package would have kept a three-bracket income tax, while the new proposal institutes a two-tier income tax bracket.

The legislation before Kelly would tax the top bracket a 5.55% tax income rate 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 proposal would raise the personal exemption allowance amount 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

If Kelly vetoes the plan, House Minority Leader Vic Miller, a Topeka Democrat, said he would not advise House Democrats to vote to sustain her veto unless they present a better alternative that is able to gain Republican support.

“This plan does more than any other plan we’ve looked at this year. That’s been my position all along. Relief should be directed at the people who need it the most, not at the people who need it the least,” Miller said.

“I don’t know that there’s anything out there that would be better than this one,” he added.

The package would also expedite the elimination of the state’s food sales tax by six months – ending the taxation by July 1 – eliminate income taxation on Social Security benefits and lower the mill levy for schools from 20 to 19.5 mills.

Miller said he was happy with the plan Republicans and Democrats compromised on, and said, unlike the governor, he was not concerned about the package’s fiscal note.

“The people looking for tax relief have waited long enough,” Miller said. “We have, in my opinion, healthy balances both now and after we implement this plan.

“Good Lord, there’s $1.7 billion sitting in a rainy day fund that didn’t exist just a few years ago. So in addition to being in a good state year to year, we’ve got that money put away in case we over refund. That’s not a hazard I’m too concerned about.”

Kelly this session also vetoed a single-rate income tax pushed heavily by Republicans, who were unable to override her veto. Lawmakers will return to Topeka on April 25 for veto session.