TOPEKA — The state’s credit rating has improved again, Gov. Laura Kelly announced this week, but her administration warns that a Senate-approved flat tax plan would damage that score.
S&P Global changed Kansas’ credit outlook from stable to positive, recognizing passage by the Republican-controlled Legislature of several of the Democratic governor’s financial initiatives. They include balancing the state budget and paying off Kansas Public Employees Retirement System debt.
“This is great news for Kansas’ budget and economic outlook, making it even more likely that our state will be seen as a smart investment,” Kelly said. “It is clear that we have put Kansas back on track by growing our economy and paying off debts.”
S&P said Kelly’s recommended budgets for fiscal years 2023 and 2024 could lead to another rating upgrade, although costly tax cuts, like the flat tax proposal, could cause the rating to fall again. The flat tax proposal would establish a 4.75% flat income tax rate for all individuals earning more than $5,225 or couples earning more than $10,450.
The cut would cost the state $568.5 million in the first full fiscal year after it takes effect, according to the state’s estimate, and has drawn criticism because it is projected to benefit the wealthiest Kansans while offering little relief to low-income earners across the state. The Institute on Taxation and Economic Policy, a Washington, D.C.-based nonprofit, estimated the annual cost to actually be $764 million.
Brianna Johnson, spokeswoman for Kelly, compared the flat tax proposal to disastrous tax policies passed during former Gov. Sam Brownback’s administration, which contributed to the downgrading of the state’s credit rating.
“Global economic experts are recognizing that Governor Kelly has gotten Kansas’ fiscal house in order by cutting taxes in a way that maintains our state’s ability to balance its budget and fully fund schools,” Johnson said. “The Kansas Legislature shouldn’t roll back that progress by passing tax cuts that our state cannot afford — and that, like we saw during the failed Brownback tax experiment, would lead to our state’s credit rating being downgraded.”
