BY: TIM CARPENTER AND SHERMAN SMITH Kansas Reflector
Democratic governor renews objection to move toward single income tax bracket
TOPEKA — Republicans in the Kansas Senate approved Wednesday a three-year, $1.6 billion tax reform bill anchored to introduction of a controversial flat 5.25% state income tax rate, but not by the two-thirds margin required to override a potential veto by Democratic Gov. Laura Kelly.
Senators spent a couple hours exploring advantages and disadvantages of sales, property and income tax provisions crafted by GOP negotiators in the House and Senate. The package, dominated by the $300 million per-year reduction in income tax revenue and elimination on April 1 of the state’s $75 million sales tax on groceries, moved to the Republican-dominated House for a vote. If passed, it would go to the governor.
A series of Senate Republicans praised features of House Bill 2284 during the Senate floor debate. A handful of Democrats, a Republican and an independent senator outlined objections on policy and procedural grounds. The vote was 25-11 in favor with two Democrats and two Republicans absent. No Democrat endorsed it.
“There is absolutely no reason not to return these resources to the people we serve. This is completely sustainable,” said Senate President Ty Masterson, an Andover Republican who was frustrated by criticism the bill tilted in favor of the wealthy. “To every tax cut you make, if you’re talking about dollar value, the rich always get more because they buy more food, they own more property, they make more money.”
He said conflict over the business of tax reform, including a pair of tax bill vetoes last year by Kelly, undermined the 2023 Legislature’s quest to deliver for Kansans. That zero-sum game could be repeated in the 2024 session without substantive compromise, he said.
“We’re saying because we want to have this warfare, we shouldn’t give benefit to anybody,” Masterson said. “All those arguments do — it promotes discontent, class warfare, yours is better than mine. It’s unhealthy.”
The dissenters
On Monday, Kelly offered a bipartisan plan devoting about $1 billion to state tax cuts. Some pieces were included in the GOP plan that emerged Tuesday from negotiations between House and Senate members. Interest in rewriting tax policy came from projections of a $2.8 billion surplus in the state treasury and $1.7 billion in a separate rainy-day fund by June 2024, assuming no unexpected increases in expenditures or reductions in revenue.
Sen. Rob Olson, an Olathe Republican who endorsed Kelly’s tax proposal, praised elements of the Republican bill. He voted against it because the legislation didn’t concentrate tax relief on people with modest incomes who struggled with sales, property and income tax obligations along with inflation.
“This tax cut that is before us is heavily slated for the people making $80,000 or more. They’re going to receive the bulk of that money,” said Olson, who said some of his peers were afraid to fight for an alternative due to concern about blowback from Masterson and right-wing special interest groups. “They’re afraid to lose what I’ve lost. I believe I’m fighting for the people in my district — not the people in the hall, not the people in Wichita, not the people across the street.”
Olson drew the ire of Masterson during the 2023 session by refusing to help Republicans override Kelly’s veto of what Olson considered an unfair bill headlined by the flat-rate income tax. In response, Masterson sacked Olson from his position as utilities committee chairman.
Independent Sen. Dennis Pyle, of Hiawatha, said some lawmakers were being led on tax policy by GOP leaders like lambs to slaughter.
Pyle, who also endorsed Kelly’s tax alternative, said nuggets of popular tax policy woven into the GOP leadership’s bill could be rescinded whenever the economy faltered or state revenue plummeted. That’s what transpired after GOP Gov. Sam Brownback signed an aggressive income tax cut in 2012, which included a big increase in the standard deduction to state income taxes. In less than one year, Pyle said, the crash in state revenue led Republicans to repeal part of the deduction.
“Whatever you do today, we all know, can be taken back. I’ve seen it happen. I’ve seen them reverse their policy promises in this building,” Pyle said.
Sen. Jeff Pittman, a Leavenworth Democrat, said if the state ran “into hard times, you bet your bottom dollar we are not increasing that tax rate.”
Instead, Pittman said, the Legislature would abandon tax relief that was beneficial to lower-income families.
“That’s where the burden’s going to hit,” he said. “It’s a natural way to hide a tax on the working families.”
The GOP’s deal
Sen. Caryn Tyson, a Parker Republican and chair of the Senate Assessment and Taxation Committee, said it would be foolish for the Legislature to derail a 100% income tax exemption on Social Security benefits, passage of a zero state sales tax on groceries and indexing for inflation of the state’s standard deduction and personal exemption on income taxes.
“I’m sorry, but, my colleagues, you are not sheep. Do not let perfect be the enemy of good,” she said.
Under the bill headed to the House, income taxes for the wealthiest Kansans would be slashed while offering minimal relief to lower wage earners. Democrats said the flat tax provision alone would deplete revenues by more than $700 million over three years. In total, the bundle of proposed tax cuts would carry a $1.589 billion price tag in a three-year period.
Other provisions in the Senate-passed bundle were in the Democratic governor’s plan, including a reduction in property taxes that supported public school funding, an income tax exemption on Social Security income and an increase in standard deductions on tax returns.
Banks and other financial institutions would get a tax cut after being excluded from a corporate tax reduction that was part of recent Kansas economic development deals on projects in De Soto and Wichita.
“There are a lot of components I really like, but I will say the flat tax is a nonstarter,” said Democratic Sen. Cindy Holscher of Overland Park. “My district would greatly benefit from the flat tax. But my district is not asking for this. My district supports the governor’s bipartisan tax plan. My district wants revenue sustainability and investments in our schools and roads.”
Sen. Marci Francisco, a Lawrence Democrat, said she felt uneasy about the GOP strategy of relying on procedure to fast track the legislation in a manner that sidestepped the typical committee process and opportunities for regular Kansans to comment. A panel of three senators and three representatives — four Republicans and two Democrats — hammered out contents of the bill Tuesday before delivering it to the Senate.
“We have seen this legislation,” said Tyson, the Senate tax chairwoman. “It is past time with $3 billion to $4 billion in the coffers. It is time to give the money back to taxpayers.”
Senate Minority Leader Dinah Sykes, a Lenexa Democrat, complained about the “rushed process” that also forbid senators from offering amendments to the negotiated deal. Sykes said the top 20% of wage earners would get 70% of the tax cuts. She said it would be beneficial to the process that the Senate fell short of a two-thirds margin, or 27 votes, needed to override a veto by the governor.
“Then we can have honest conversations about property tax relief, or helping our working families in Kansas, because this is going to benefit the rich,” Sykes said.