TOPEKA — The Kansas Legislature rebounded from dizzying defeat of a tax bill endorsed by Gov. Laura Kelly and Republican leadership by voting early Saturday for a three-year, $1.57 billion alternative that negotiators promised would deliver a state tax reduction to every Kansan.
On Thursday, rebellious Democrats and Republicans in the House scuttled a Senate-passed $1.4 billion tax package negotiated by Senate President Ty Masterson, House Speaker Dan Hawkins and Kelly. Several key features of that bill were retained in the latest deal funneled into House Bill 2036 and lauded by Sen. Caryn Tyson and Rep. Adam Smith, the Republicans who led their respective three-person House and Senate conference committees.
“I think we’ve come up with a really good product,” Tyson said. “Our goal all along is a tax cut for everyone. This isn’t about us as individuals. I’m going to ask this body to turn down your WI-FM station — what’s in it for me — and remember this is for our constituents.”
The reform blueprint would reduce state revenue from property, sales and income taxes by $636 million in the first year, $458 million in the second year and $462 million in the third year. The $1.57 billion price tag would fall beyond the line in the sand drawn by the Democratic governor, which could set the stage for a veto.
The opportunity to advance tax cuts was courtesy of the state’s $4 billion revenue surplus, but some lawmakers have argued $1 billion of the total was one-time money from the federal government that shouldn’t be included in tax-cut math.
Johnson County Democrat Sen. Ethan Corson said he was concerned hefty tax reductions would erode the state’s ending balances over the next five years. He said current projections indicated the state could face a $392 million deficit by 2029 if this tax bill became law. During the frenzy to find a bill capable of clearing the House and Senate, he said, some lawmakers didn’t want anyone to look closely at the reality of state spending exceeding revenue collections.
“Just don’t believe your lying eyes,” Corson said. “Don’t worry about it. Just keep your head in the sand.”
Masterson, the Senate’s president and a supporter of the bill, offered a rebuttal: “I don’t think it’s lying eyes. It might be more of the tongue we’re worried about.”
The GOP-led 40-member Senate voted 24-9 for the bill, which handed the conversation to the 125 members of the House. The House was more enthusiastic and voted 119-0 to send the legislation to Kelly.
“Everybody can hold their heads up high and go home and know they did the work for the people of Kansas,” said Hawkins, the House’s top Republican.
The Legislature, which adjourned for a three-week break, plans to return in late April. Before lawmakers come back to the Capitol in Topeka, the state’s group of economists and fiscal analysts must revise tax revenue estimates for the current and future fiscal years. Those projections could a decisive influence on the final state budget, especially if the group predicted a downward spiral in tax revenue.
While Kelly praised the tax plan defeated by the House on Thursday, she set the framework for a session-long tax debate by vetoing a $1.6 billion tax plan in January developed by Masterson and Hawkins. The governor was a persistent opponent of that bill’s lurch to a single-rate income tax, which critics argued favored wealthy Kansans.
Nuts and bolts
The package included the popular idea of eliminating July 1 — six months early — and the state’s 2% tax on groceries and repeal of the state’s income tax on Social Security benefits in the 2024 tax year. The loss of six months of food sales tax collections would drop state revenue by $63.5 million. The Social Security piece would amount to a $396 million reduction in state income tax payments over the 2025, 2026 and 2027 fiscal years.
The amount of appraised value of a residence for figuring property taxes for K-12 public education would surge to $100,000 from the current exemption of $40,000. In addition, the property tax for schools would be based on 19.5 mills, a drop of 0.5 mills. These adjustment would curtail state revenue by $336 million in the course of three years, but a reduction in tax revenue for education would be replaced through general state appropriations.
