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Gov. Laura Kelly calls special session of Kansas Legislature to contend with tax-cut bill

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Gov. Laura Kelly calls special session of Kansas Legislature to contend with tax-cut bill

May 29, 2024 | 11:56 am ET
By Tim Carpenter Rachel Mipro
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Gov. Laura Kelly calls special session of Kansas Legislature to contend with tax-cut bill
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Gov. Laura Kelly, a Topeka Democrat, called the 2024 Kansas Legislature to convene for a special session to conclude work on a tax reform compromise bill acceptable to the Senate President Ty Masterson, R-Wichita, and a majority of the House and Senate that would trim state income, sales and property tax revenue without jeopardizing core government services in the years ahead. (Sherman Smith/Kansas Reflector)

TOPEKA — Gov. Laura Kelly said Wednesday she would issue the order calling the Kansas Legislature to a high-stakes, election-year special session June 18 to work on reducing property, sales and income tax burdens without propelling the state toward financial problems down the road.

Kelly turned to powers in the Kansas Constitution enabling governors to compel the Legislature to reconvene outside bounds of the traditional January to May period. The governor will issue the formal proclamation in several days, but had been working with legislative leaders on a date after she vetoed the Legislature’s latest mega-tax bill.

“I am committed to working with the Legislature to deliver responsible, sustainable tax cuts for all Kansans,” Kelly said. “A special session provides the opportunity for bipartisan collaboration on comprehensive tax relief that does not threaten Kansas’ solid fiscal foundation.”

Her statement said a collaborative effort at the Capitol could produce a swift “compromise to put more money back into Kansans’ pockets.”

Kelly, the second-term Democrat, proposed several tax plans to the Republican-led Legislature during the regular 2024 session and she vetoed three bills passed by the Legislature that would have shed more than $500 million annually in state revenue. A shifting coalition of GOP and Democratic legislators expressed interest in slashing taxes, while the governor held to the view Kansas should be careful not to invite budget problems reminiscent of what transpired after Gov. Sam Brownback signed a 2012 bill aggressively lowering the state income tax.

Kelly set the tone on tax policy in January by drop-kicking the Republican leadership’s tax-cut dream bill. Her latest move was to reject a $2.3 billion bill passed in May with bipartisan majorities. Throughout the legislative session, Kelly had worked with legislative leadership to use the state’s financial surplus to implement “robust” tax reform that was not “unsustainable” in the next three to five years.

House Speaker Dan Hawkins, a Wichita Republican, said a special session could have been avoided if the governor accepted “bipartisan, sustainable” tax bills adopted by the Legislature. He said the special session would cost an estimated $84,000 per day and complained the governor was playing “election-year political games” at the expense of Kansas taxpayers.

“We’ve been attempting to compromise with the governor’s office all year, so I’m hopeful that she’s finally feeling the pressure to put an end to this and join the overwhelming majority of legislators who are ready to deliver tax relief to all Kansans,” Hawkins said.

 

Deal proves elusive

There has been agreement among many legislators and the governor to eliminate July 1 rather than Jan. 1 the state’s 2% sales tax on groceries. That onerous state tax has been gradually sliced down from 6.5%, with the delay due to a refusal by GOP lawmakers to go along with Kelly’s campaign to “ax” that tax.

Broad agreement has existed among Kansas politicians to end the state’s income tax on Social Security benefits in the 2024 tax year.

However, tax bills floated during the regular session failed to find the right blend in terms of the exemption on residential property tied to the statewide school finance levy and the personal exemptions and standard deductions on state income taxes. The biggest obstacle was the level of reduction applied to basic state income tax rates with the governor preferring a three-tier model and some Republicans demanding a single-rate or flat income tax.

Kansas operates with a three-tier individual income tax rate structure with rates of 3.1% on income under $15,000, 5.25% on income between $15,000 and $30,000, and 5.7% for income above $30,000.

Kelly questioned the cost of proposals embraced by Senate President Ty Masterson, R-Andover, and Hawkins and the GOP’s focus on delivering large tax breaks to wealthy Kansans. The House and Senate failed in veto override attempts on two of the three tax bills.

The governor  repeatedly warned legislators passage of unreasonable tax legislation would prompt vetoes and lead to a special session of the Legislature.

In an interview Wednesday, Kelly said the Legislature should pull together a new bill that captured the realistic need for robust tax cuts for all Kansans that could be financially sustainable for the state over the long haul.

“There has to be a new bill. This is a new session, so everything that was is no longer. We’re just starting over,” Kelly said. “I’m one of those who looks out to the future and I want to make sure that if we sign this bill into law, that we won’t be putting our schools, our roads, our foster care system, everything else, at risk to go back to the way it was before I took office.”

 

Election-year pressures

Masterson, who presides over a GOP supermajority in the Senate, said the Democratic governor’s opposition to the Legislature’s bipartisan tax bills was “absurd” given the state’s revenue surplus.

The state’s tax revenue forecasters reported in April that Kansas could end the current fiscal year June 30 with a surplus of $2.6 billion in the general treasury and $1.7 billion in a special rainy-day fund. Assuming state tax revenue was reduced next fiscal year by $530 million, the forecast said the state could end the upcoming fiscal year with $1.9 billion in the state’s general fund and $1.8 billion in the emergency account.

“On multiple occasions, the governor had a compromise tax plan on her desk that was backed by significant members of her own party and included real relief for every Kansan, especially those with lower incomes,” Masterson said. “Each time, she chose to veto it in a power play to get her way. So, here we are. The Legislature will convene on June 18 and swiftly pass tax relief again. Hopefully, this time, the goalposts stop moving and she signs the bill.”

The special session was called during a summer season devoted to legislative candidates working toward the August primary election and the November general election. All 40 Senate and all 125 House seats are up for grabs in the 2024 election cycle.

A coalition of influential organizations, including the Kansas Farm Bureau, Kansas Chamber and about a dozen others, sent a letter to Kelly urging her to make a deal on meaningful tax reform. That coalition urged the governor to act on property and sales tax reforms even if a deal couldn’t be struck on income taxes.