Democratic Gov. Laura Kelly on Friday vetoed a tax relief plan from the Republican-controlled Kansas Legislature for the second time in two months, arguing that even the new, smaller measure would "decimate" the state's finances.
The second tax bill, like the first, was designed to provide relief to individuals and businesses that have been paying more in state income taxes because of changes in federal tax laws at the end of 2017. Republicans are expected to try to override her veto when the Legislature reconvenes May 29 for a last day in session before adjourning for the year.
The bill vetoed Friday would save taxpayers roughly $90 million during the budget year beginning in July and about $240 million over three years. It was less than half the size of a GOP tax relief plan that Kelly vetoed in late March. Republican leaders and business groups had hoped in vain to avoid a veto by making the second plan smaller.
"It will decimate the state's ability to pay our bills and invest in our people," Kelly wrote in her veto message to lawmakers. "Successful tax reform must be shaped by a thoughtful, big-picture vision not by a rushed attempt to achieve an immediate political victory."
GOP legislators pushed the second tax bill through the Legislature after lawmakers approved an increase in public school funding of roughly $90 million a year. They also boosted spending on the state prison system, social services and higher education as part of a record $18.4 billion budget for the state fiscal year beginning in July.
Democrats warned that the second tax bill, like the first one, could cause big budget shortfalls within a few years.
However, when the second tax bill passed, Republican leaders appeared to the two-thirds majorities necessary in both chambers to override a veto. They couldn't say the same about the first tax bill and never attempted to override Kelly's first veto.
"Vetoing not one but two commonsense tax relief plans does not display the kind of fiscally-responsible leadership candidate Kelly promised," House Majority Leader Dan Hawkins, a Wichita Republican, said in a statement.
Kelly has called for a comprehensive study of the state's tax system and said during her campaign for governor last year that the state should stabilize its budget before pursuing tax relief. She also said such measures returned to a tax-cutting experiment under former GOP Gov. Sam Brownback that became nationally notorious because of persistent budget woes that followed.
Bipartisan legislative majorities repealed most of the Brownback tax cuts in 2017, and Kelly ran successfully last year against Brownback's political legacy.
"Pro-business, pro-growth, pro-family tax policy can absolutely reshape Kansas for the better, but only if it fixes the failures of the past, not repeats them," Kelly said.
Republican leaders argued that failing to enact tax relief represents a tax increase. Hawkins dismissed Kelly's call for a tax study "as a serious lack of leadership."
"Sadly, Laura Kelly's tax increase will take money from hardworking Kansans and place it in the coffers of big government," said Senate President Susan Wagle, also a Wichita Republican.
Like other states, Kansas faced revising its income tax code because it is tied to the federal tax code. The federal tax changes championed by President Donald Trump lowered rates but also included provisions that raised money for Kansas, in part by discouraging individual filers from claiming itemized deductions.
Like the first, the second bill would allow individuals to itemize on their state tax returns even if they do not itemize on their federal returns. It also would cut taxes for corporations, particularly large firms with operations outside the U.S.
The measure also included provisions aimed at helping the state collect more taxes from internet sales and start dropping the state's 6.5% sales tax on groceries.
Kelly had promised during her campaign last year to lower the sales tax on groceries. Democrats scoffed at the incremental amount less than 1 percentage point, or $1 on a $100 grocery bill, in 2021.