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April 8, 2024Topeka, Kan. |  By: AP

Kansas lawmakers approve a tax bill but the state still might not see big tax cuts

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TOPEKA, Kan. (AP) — Kansas legislators are struggling to overcome political divisions that have prevented their state’s residents from seeing major income tax cuts over the past two years even as other states have slashed income tax rates.

The Republican-controlled Legislature approved a bill early Saturday morning that would cut income, sales and property taxes by more than $1.5 billion over three years. However, statements from Democratic Gov. Laura Kelly earlier in the week and from a top aide Friday night suggested she might veto the plan. It wasn’t clear supporters would have the two-thirds majorities in both chambers needed to override such an action.

The debate appears stuck where it was at the start of 2023, with top Republicans pushing for a single personal income tax rate instead of the current three and Kelly opposed to steps in that direction. Because lawmakers bundle mulitple tax cuts in a single bill, the stalemate has prevented Kansas from enacting other proposals, such as eliminating taxes on retirees’ Social Security benefits and lowering state-imposed property taxes that help fund public schools.

A dozen other states cut income tax rates last year, according to the conservative Tax Foundation. 

“I see a future where this is probably going to get vetoed because of every conversation that I’ve had,” Senate Minority Leader Dinah Sykes, a Kansas City-area Democrat and Kelly ally, said during her chamber’s debate.

The bill approved by Kansas lawmakers would move the state to two personal income tax rates instead of the current three, setting the top rate at 5.55% instead of the current 5.7%. It would eliminate income taxes on Social Security benefits, which kick in when a retiree earns $75,000 a year. It would reduce the state’s property taxes for public schools and eliminate an already-set-to-expire 2% sales tax on groceries six months early, on July 1.

Kelly typically has signed bills with large bipartisan majorities, but Democrats and a few Republican dissenters have stuck with her in the Senate to prevent veto overrides on tax issues.

Lawmakers adjourned Saturday morning for a spring break but are set to reconvene April 25 for their last five days in session this year.

A key issue for the governor’s Senate allies was whether the plan eventually would cause budget problems within a few years.

Debates over tax cuts in Kansas have been fraught since a nationally notorious 2012-13 experiment in slashing income taxes under Republican Gov. Sam Brownback was followed by large budget shortfalls that persisted until lawmakers repealed most of the cuts in 2017. Kelly, then a state senator, won her first term as governor in 2018 by running against Brownback’s policies and still mentions the tax experiment regularly.

“It far exceeds the number she’s been pretty clear with,” Lawrence said.

Kelly had backed a compromise plan that her office drafted with top Republicans this week, preserving the state’s three personal income tax rates but dropping the top rate to 5.5%. She told House Democrats in a Thursday morning meeting that she opposed going to two tax rates because it was a step toward a single-rate “flat” tax that she believes benefits wealthy taxpayers the most.

“We don’t want to start down that path,” Kelly told the group.

But House Democrats believed the plan Kelly favored also was too weighted toward wealthy taxpayers, and they were joined by Republicans who didn’t think it was generous enough to scuttled it Thursday in the House.

House Democrats saw the plan approved Saturday as much better. They circulated figures showing the cuts would eliminate income taxes for married couples earning $25,000 or less, with the percentage income tax cut dropping as taxpayers grew wealthier.

“It was what I wanted to see, which is real relief for real people,” House Minority Leader Vic Miller, a Topeka Democrat, told his colleagues in a meeting before the House vote.

Most Republican lawmakers agreed.

“Let’s give the money back to the taxpayers,” Senate tax committee Chair Caryn Tyson, an eastern Kansas Republican, said during her chamber’s debate. “Keep it in their pockets.”