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April 25, 2023Topeka, Kan. |  By: AP

Kelly vetoes bill to cut Kansas taxes $1.4B over 3 years

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TOPEKA, Kan. (AP) — Democratic Gov. Laura Kelly on Monday vetoed a bill that would have cut taxes in Kansas by nearly $1.4 billion over the next three years, objecting to a proposal included by conservative Republicans to impose a single-rate flat income tax for individuals.

Kelly said abandoning the state’s current three-rate individual income tax with higher rates for higher earners would have been fiscally reckless and threatened funding for public schools. She announced her veto at a Topeka-area elementary school and recalled the state’s nationally notorious 2012-2013 experiment in slashing income taxes and the huge budget shortfalls that followed under then-Republican Gov. Sam Brownback.

Republican leaders plan to attempt overriding Kelly’s veto once the full GOP-controlled Legislature reconvenes Wednesday to wrap up its business for the year. Backers of the bill included Americans for Prosperity, the grassroots low-tax, small-government group funded by the billionaire industrialist Koch brothers. Supporters appeared to have a good chance of getting the two-thirds majorities necessary to override a veto.

“It is a throwback to the Brownback tax experiment, and we all know how that turned out,” Kelly told reporters, hitting a key theme of her successful 2018 and 2022 campaigns for governor. “Any tax cut we pass needs to be sustainable, fiscally responsible and targeted to the people who need it the most.”

The measure also would have reduced taxes on retirees’ Social Security incomes and accelerate phasing out of the state’s sales tax on groceries, so that it would end at the start of 2024 instead of 2025, both measures Kelly supported. It also would have reduced property taxes for most homeowners by $46 a year, a proposal pushed by Democrats.

The income tax changes were a nonstarter for many Democrats, particularly because it set the rate at 5.15% when the state’s current top rate is 5.7%.

As an alternative, Kelly proposed a one-time, $450 rebate for each Kansas individual filer, so that the state’s revenues would not be reduced each year going forward.

Republicans have been cold to the idea of a rebate in the past. Senate President Ty Masterson, a Wichita-area Republican, called the rebate proposal “gimmicky” and tells people that the governor sees tax dollars as “her money,” rather than “recognizing the money we collect belongs to the people.”

Kansas’ tax collections generally have run ahead of expectations since lawmakers repealed most of the tax experiment under Brownback in 2017.

And the veto came four days after state officials and university economists issued a new fiscal forecast that boosted the state’s official projections for tax collections through June 2024 by roughly 1%. Even with the tax cuts Kelly vetoed factored in, the state is on track to end June 2024 with surplus cash and rainy day funds of more than $4 billion.

Kelly and lawmakers in both parties see the tax cuts as a way of helping people deal with inflation.

“It’s especially careless and out-of-touch for Governor Kelly to veto this broad, sustainable tax policy that provides tax relief to ALL Kansans,” House Speaker Dan Hawkins, a Wichita Republican, said in a statement.