Kansas governor vetoes Republicans’ proposed income tax cuts

TOPEKA, Kan. (AP) — Democratic Gov. Laura Kelly on Friday vetoed proposed income tax cuts in Kansas, the third time in two years that she has rejected a Republican plan and accused GOP lawmakers of trying to revive a nationally notorious fiscal experiment.

The bill would have saved individuals and businesses $284 million over three years. But Kelly, a former state senator, said she saw the damage done to the state’s schools and infrastructure by past tax cuts.

“I can’t let that happen again,” she said.

“I have a responsibility as the chief executive of this state to ensure that policy that we enact is fiscally responsible and will allow us to provide essential government services,” she told reporters at the Statehouse.

The Republican-controlled Legislature could try to override her veto once lawmakers return May 3 from their annual spring break to wrap up their business for the year. The bill passed last month with more than the two-thirds majority necessary in the Senate, but supporters were three votes short of the required supermajority in the House.

GOP legislators have said they want to provide relief to individuals and businesses whose state income taxes have risen because of changes in federal income tax laws enacted at the end of 2017. Their bill also included a modest increase in the standard deduction for all individual filers.

Republicans have argued that Kansas is receiving an unanticipated revenue “windfall” because its tax code is tied to the federal tax code and compared it to finding someone’s lost wallet full of cash on a sidewalk. They’ve also argued that Kansas residents should get the fullest possible benefit of national tax policies championed by former President Donald Trump.

But Kelly has repeatedly recalled the persistent budget shortfalls that followed income tax cuts in 2012 and 2013 under then-GOP Gov. Sam Brownback, which made Kansas a still-cited example for other states of how not to do trickle-down economics. Bipartisan legislative majorities repealed most of the Brownback-era tax cuts in 2017, and Kelly won the 2018 governor’s race after running against his legacy.

She vetoed two Republican tax-cutting bills in 2019, making similar arguments.

Legislators gave this year’ tax bill final approval last month on the same day that Kelly’s budget director and Department of Revenue chief warned in a memo that a change in federal policies on COVID-19 relief for businesses would cost the state $360 million in revenues over three years. The change, made by Congress in December, created a new federal income tax deduction for some businesses.

The revenue loss — an issue in a majority of states — complicates what has been a sunny fiscal picture for Kansas. Tax collections since July 1 have run ahead of expectations, and state officials and university economists plan to meet Tuesday to revise the fiscal forecast used by Kelly and lawmakers in making budget and tax decisions.

The governor has been open to increasing the standard income tax deduction but has proposed offsetting the cost of that policy by imposing the state’s 6.5% sales tax on online music and movies and digital streaming services. That idea is a non-starter for Republicans, who have derided it as the “Netflix tax.”

The measure Kelly vetoed would allow people to claim itemized deductions on their state returns even if they don’t on their federal returns. The federal tax changes in 2017 discouraged people from itemizing on their federal returns. Kansas law currently does not allow people to itemize on their state returns if they don’t on their federal returns, resulting in larger state tax bills for some.

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