Gov. Laura Kelly rejects sweeping, Republican-backed tax cut proposal with veto
Gov. Laura Kelly vetoed Friday a sweeping slate of tax changes that would have cost the state $284 million over three years, arguing that price tag would threaten the state's fiscal health.
It isn't the first time Kelly has rejected similar proposals, which would allow residents to better take advantage of the 2017 tax cuts championed by then-President Donald Trump. In 2019, Kelly vetoed an even more expansive bill that would have cost $1 billion over three years.
While this year's version is more modest, Democrats have criticized elements of Senate Bill 50 as benefiting large businesses and have instead pushed for more targeted relief aimed at working-class Kansans.
Kelly said the bill harkened back to the 2012 tax cuts pushed by then-Gov. Sam Brownback, which resulted in cuts to state services and didn't provide the economic gains for which supporters had hoped.
"There is a real insistence that we continue to cut taxes irresponsibly and not in ways that benefit the vast majority of Kansans," Kelly told reporters after a swearing-in ceremony of Labor Secretary Amber Schulz.
Legislative Republicans, meanwhile, slammed the decision and said they would aim to override the veto when members return in early May.
"Sadly Governor Kelly seems confused about which administration we are living in," House Speaker Ron Ryckman, House Majority Leader Dan Hawkins and House Speaker Pro Temp Blaine Finch said in a joint statement. "She is now governor and her continued insistence on higher taxes, depriving Kansans of the benefits of federal tax cuts and increasing the tax burden on Kansas employers is the only experiment we are suffering through."
Bill would have carved out provisions from state tax code
The main target of criticism is a move to carve out provisions of the state tax code from the federal bill.
One of those changes would give businesses greater flexibility to bring profits from overseas affiliates on some items, such as intellectual property, back into Kansas without paying taxes on them.
Other elements of the bill would allow residents to itemize on their state tax return, regardless of whether they itemize on their federal payments, allowing them to take advantage of provisions in the federal law that discourage itemization.
Republicans have framed these provisions as being a way of ensuring Kansans can access tax relief they have been owed since 2017.
"It allows Kansas taxpayers to get the money they were meant to get in the first place," said Sen. Caryn Tyson, R-Parker, on the Senate floor earlier this year.
The legislation does include elements that could have appealed to Kelly.
Chief among those is an increase to the standard deduction, which would rise to $3,500 for single filers and $8,000 for couples filing jointly. Democrats have long pushed for such a move, arguing it will help middle- and low-income Kansans.
And the legislation addresses a longstanding gap in the tax code where out-of-state merchants, such as Amazon or eBay, that conduct a transaction on behalf of a third-party vendor do not have to pay sales tax, something the governor has long pushed legislators to do.
Chamber likely can override governor's veto
But Kelly instead said Republicans should have enacted her competing proposal to cut taxes, which would have also enacted a tax on digital services such as Netflix and Spotify, while using those proceeds to reduce the standard deduction. The idea was never seriously considered in the legislature under heavy criticism from conservatives.
SB 50 passed the Senate on a 30-10 vote, meaning that the chamber would likely be able to overcome Kelly's veto.
The House poses more of a problem for the bill's supporters. The bill passed on an 81-43 vote — three votes shy of the threshold needed to override a veto, with one member not present.