Kansas income tax cuts are coming: Legislature passes deal between Kelly, GOP leaders

The Kansas Legislature on Tuesday passed tax cuts that Gov. Laura Kelly will sign, ending a months-long dispute over the affordability of reductions that led to a rare special session.

The bipartisan package consolidates the state’s three income tax brackets into two, while cutting rates, providing all taxpayers a reduction. It also includes tax cuts for retired residents and a larger property tax exemption for homes.

The Senate passed the bill 34-4, followed by the House in a 121-2 vote.

“After 2 years of hard work by our legislative tax committees and multiple vetoes by the governor, long overdue tax relief for all Kansans is now on its way,” House Speaker Dan Hawkins, a Wichita Republican, said in a statement.

Kelly, a Democrat, struck an agreement on the legislation with top Republican lawmakers last week and said she would sign the bill if it passed. The deal came after Kelly vetoed previous tax plans earlier this year, citing concerns about their cost.

“I appreciate the Legislature’s quick work today to pass this tax relief package,” Kelly said in a statement. “Although this package is not perfect and emphasizes income tax reductions instead of property tax relief, it does provide significant relief while preserving our ability to continue fully funding our public schools, roads and bridges, and State Water Plan. I will sign this bill upon receiving it.”

The package is expected to cost about $380 million a year. While all sides want tax cuts, Kelly had said their annual cost shouldn’t exceed roughly $425 million. Because of previously passed tax reductions, lawmakers believed they needed to limit a package to about $375 million to satisfy the governor.

The bill sets income tax rates at 5.2% and 5.58% with the dividing line between the brackets at $23,000 annual income. Under current Kansas law, the brackets are set at 3.1%, 5.25% and 5.7%, with individuals making over $30,000 a year in taxable income taxed at the top rate.

Past proposals had included an early elimination of the state sales tax on food, currently set to end Jan. 1. The agreement dropped that provision, but still contains additional higher income tax deductions and exemptions included in previous bills. It also sets the state child and dependent care tax credit at 50% of the federal allowance.

An elimination of taxes on Social Security income is also included. And the bill eliminates an often-underfunded property tax reduction program for local governments.

“We’ve made a significant effort to try to reduce that amount,” Rep. Adam Smith, a Weskan Republican who chairs the House Tax Committee, said of the cost of the bill.

Frustrated lawmakers

The Senate passed the bill only after an angry debate featuring Republican infighting over who was to blame for the special session – and who could take credit for the bill’s passage. Lawmakers failed to override Kelly’s vetoes of tax plans in part because a small number of GOP senators voted to uphold the vetoes. Those votes infuriated other Republicans.

“We wouldn’t even be here today had these individuals previously voted for very reasonable tax cuts,” Sen. Virgil Peck, a Havana Republican.

Sen. Rob Olson, an Olathe Republican and one of the senators who had previously voted to uphold Kelly’s vetoes, said the new compromise was negotiated in good faith. “Hopefully there will be more tax cuts later,” he said.

In a particularly fiery moment, Sen. Mark Steffen, a Hutchinson Republican who isn’t running for reelection, criticized the inclusion of a tax credit related to daycare.

“It is not the platform of the Republican Party to emphasize daycare and the separation of children from their parents,” Steffen said, calling it an “opportunity to put mothers to work.”

That drew a sharp rebuke from Masterson, who called the comments over the top and the “angry words from a disgruntled person who is not coming back.”

Senators voted to end debate after about an hour, preventing senators from offering amendments that could have upended the negotiated agreement.

Debate went more smoothly in the House, where lawmakers largely expressed support for the package even as they expressed disappointment it isn’t more expansive. In particular, lawmakers said they had hoped the plan would have provided more property tax relief.

“I scratch my head as to why what we’re doing is top heavy to income tax cuts,” House Minority Leader Vic Miller, a Topeka Democrat, said.

Miller offered an amendment to include a property tax cut for disabled veterans and also cap the elimination of Social Security taxes at $250,000. Under current law, the exemption is set at $75,000. The House rejected the amendment on a voice vote.

The special session was in some ways months in the making. Kelly had consistently promised to call lawmakers back to Topeka if they ended their regular session without passing a tax plan she was willing to sign. That happened in mid-May, when Kelly vetoed a plan that shared similarities with the current proposal but was costlier.

The special session interrupted the summer campaign season ahead of the August primary. Every legislative seat is on the ballot this year.

Democrats are hopeful they can break the Republican supermajority in one or both chambers this fall. The party had been divided throughout the spring over taxes, with many House Democrats often voting for bills the governor later vetoed and Senate Democrats opposing those measures.

On Tuesday, Democrats supported the bill nearly unanimously.