Kelly vetoes income tax cuts over cost, risking backlash
Kansas Gov. Laura Kelly on Wednesday vetoed a sweeping package consolidating the state’s income tax brackets that she called too expensive, setting up an uncomfortable showdown with the bipartisan coalition that passed the measure.
The Democratic governor’s veto, one of the most consequential of her time in office, places her at odds with nearly all lawmakers and will test her influence among Democrats, many of whom supported the measure. The House passed the bill unanimously, while the Senate passed it 24-9.
Republican leaders plan to try to override the veto — with or without Democratic support. The veto and the coming override fight represents an extraordinary moment that could help define Kelly’s legacy and determine whether Kansas is moving into a new era of significant tax cuts.
Kelly and her aides have consistently described the legislation, which would move Kansas from three state income tax brackets to two and give many taxpayers a cut in the process, as too costly. Even as Kansas sits
on a massive stockpile of cash, the governor has emphasized any tax cuts must be financially sustainable over the long term and she has advocated for a
less-costly alternative plan.
The annual cost to state revenues under the vetoed plan was
estimated at $635 million the first year and roughly $460 million each year after. Kelly has generally held that the annual ongoing cost of tax cuts shouldn’t exceed $425 million.
“Kansans need meaningful sales, property, and income tax relief. However, we must ensure that the plan is affordable for the long term,” Kelly said in a statement. “We must be mindful of the fiscal mistakes of the previous administration and ensure we can provide tax relief while continuing the progress we have made as a state.”
State officials last week 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%.
But Kelly said should couldn’t “sign into law a bill that jeopardizes our state’s future fiscal stability.”
“I have said repeatedly that I will do everything in my power to prevent our state from the fiscal mismanagement of the previous administration,” Kelly said. “Since becoming governor, my administration has been laserfocused on getting us back on track, so we don’t go back to the days of fourday school weeks, crumbling roads and bridges, and crippling debt.”
Kelly added that the legislation “is too expensive and risks reversing the progress we’ve made.”
Kelly, who has sought to cast herself as a “middle of the road” politician, first won the governor’s office in 2018 on promises to keep Kansas from falling back into the kind of budget crisis that rocked the state during Republican Gov. Sam Brownback’s time in office. Brownback pushed an aggressive set of income tax cuts as he sought the presidency and national recognition. But the plan soon led to sharp budget shortfalls.
Lawmakers largely rolled back the tax cuts in 2017, but only after voters swept some conservative lawmakers from office and replaced them with moderate Republicans and Democrats. For a time, chastened lawmakers tamped down on sweeping tax cuts.
But the state’s cash reserves have swollen in recent years, in part with federal pandemic aid, and the appetite for tax cuts has grown.
Legislative researchers estimate that with the tax package, Kansas will end 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.
A potentially raucous and divisive override fight lies ahead. The Legislature is set to reconvene for a wrap-up session on Thursday, though floor action won’t begin until Friday.
“One by one we’ve overcome Governor Kelly’s objections to delivering your money back to you in the form of property, income, Social Security, and sales tax relief. And every time, the Governor moves the goalposts and vetoes the bill,” House Speaker Dan Hawkins, a Wichita Republican, said in a statement.
Republicans, with limited exceptions, are all but certain to support overturning Kelly’s veto. But Democrats may be divided. While Senate Democrats opposed the measure, House Democrats backed it and may support an override, which would
be a rare instance of Democrats breaking with their governor en masse.
House Minority Leader Vic Miller, a Topeka Democrat, told The Star on Wednesday that he hasn’t advised House Democrats on whether to support a veto override. He said that before the veto he had voiced a need for two things: to see an alternative tax plan and assurances that it will be accepted by Republicans.
Kelly on Wednesday outlined an alternative tax plan, which includes income tax rate cuts, but Miller said he doesn’t know if GOP lawmakers will support it. Miller said the governor is “really rolling the dice.”
“Tough, tough spot for Democrats,” Miller said. “I want to back the governor. The governor deserves all the credit for us being in this situation in terms of having money available to refund the people. So I respect her position. I just don’t know I want to gamble the way she is — and maybe it’s not gambling, maybe she’s got some arrangement with Republican leadership. But I’m not aware of any of those kinds of details.”
The legislation vetoed by Kelly would tax the top 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 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.
The measure also eliminates taxes on Social Security income, lowers the statewide mill levy for schools from 20 mills to 19.5 mils and accelerates the elimination of the state sales tax on food to July 1, six months ahead of current law.
KELLY CALLS FOR ALTERNATIVE PLAN
Along with vetoing the Legislature’s proposal, Kelly released an alternative tax plan and urged lawmakers to support it. Her plan would maintain the state’s current three income tax brackets but lower each rate. It would also raise the standard deduction, personal exemption and child care tax credit for dependent care expenses.
It also includes eliminating state taxes on Social Security income and exempting the first $125,000 of all homes from the statewide property tax levy.
Republicans sought to pressure Kelly to sign the Legislature’s tax package in the run up to the veto. Hawkins had said Friday that the new revenue projections should have made signing the bill an easy decision for the governor.
“Today’s consensus revenue estimates show a stable economy and a positive outlook for the future,” Hawkins said. “It also makes clear that the bipartisan tax relief passed overwhelmingly by the legislature is both sustainable and long overdue.”
Kansas is one of numerous states weighing tax cuts. In 2024, at least 14 states, including Missouri, have income tax reductions taking effect, according to the Tax Foundation, a Washington, D.C.-based think tank that advocates for tax reform. Ohio and Montana are consolidating tax brackets and Georgia is adopting a flat tax.
Even if Kelly’s veto stands, it will almost certainly not be the end of the tax debate. Both Republicans and Democrats want to be able to run for re-election on having delivered tax cuts, and Kelly has promised to call the Legislature into special session if a tax plan she finds acceptable doesn’t pass.