Kansas Gov. calls tax plan 'too expensive'; expert weighs in

TOPEKA (KSNT) - Kansas Governor Laura Kelly is weighing in on a tax package sent to her desk, which includes a slew of tax cuts.

The package received bipartisan support in the Senate with one Democrat voting in favor of the plan, and it passed unanimously in the House. However, the Governor said Tuesday that her initial interpretation of the bill is that it's 'too expensive.'

"I think what I said when it got passed, though, is it's a little out of the ballpark... it's too expensive... so I really need to take a look at that and have some serious conversations with my budget people... looking forward to see if my gut sense is that it is too expensive and not sustainable," Kelly told reporters Tuesday.

Kelly is tight-lipped on whether she'll veto the plan. She only has about a week left to decide as lawmakers return to the statehouse next week.

The package that passed just hours before lawmakers adjourned earlier this month provides property tax relief and eliminates the income tax on social security. It also removes the state food sales tax by July 1 – something the Governor's been pushing for since her re-election campaign in 2022.

Another key feature of the plan includes moving the state to a two-rate income tax system. It eliminates the bottom bracket and reduces the top two brackets by 0.15%.

HOW MUCH CAN YOU SAVE?

Nexstar's Kansas Capitol Bureau spoke with Topeka economist Paul Byrne to get answers on how much Kansans could save under the income tax changes.

"Somebody making about $20 thousand a year would see their taxes go down by about $70... somebody making $50 thousand a year would see their taxes go down by about $180... so that's kind of the dollar amount... somebody making a higher income, like $100 thousand a year would see their taxes go down by about $165... and that's for an individual person," Byrne said during an interview on Topeka political show "Inside Kansas Politics" on Sunday.

IS THE TAX PLAN 'SUSTAINABLE'?

Byrne also noted that the plan is "sustainable" in the "short run." He also weighed in on long-term sustainability based on the numbers he's reviewed.

"The big question is what happens if you have a decline in revenue? So, income tax base is pretty volatile... property tax is very stable... sales tax is a little more volatile than the property tax. So, in the short run it's definitely sustainable. The question is what happens if you experience a 5% or 8% decrease in income tax revenues... then are you getting closer to the point... where you're going to have to dip into the 'Rainy Day Fund'?" he explained. "The numbers I looked at... it looks like if you had an 8%... 9% decline in income tax revenues... you may get to the point where you have to dip into that 'Rainy Day Fund'... but over the long run it seems like it's kind of in that sustainable range."

On Tuesday, the Governor indicated that she's anticipating gaining more clarity on her decision from the new consensus revenue estimates set to come out this week.

"That's helpful to see what the projections are... we had been riding high, and we were beating the estimates all the time, but in the last seven or eight months we've seen a bit of a downturn based on the estimates... we're still in pretty good shape, but we need to see if that's a trend... if estimates are going to be lower, which would feed into that sense that that package is too expensive and not sustainable over the long haul," Kelly said.

"One thing people need to remember is they keep looking at our ending balance... or our 'Rainy Day Fund' and thinking 'we got all this money'... and it's true... we do! I've tried to spend it to pay down debt and do other kinds of one-time things that would shore up the financial foundation of the state. It's not money that you can spend on recurring expenses. So, you can't use that money and give a tax cut. You could do a tax rebate, which I suggested several times, but you can't do a structural change to the tax system using that money," Kelly continued.

Kansas lawmakers return pro forma on Thursday, April 25. The veto session is scheduled for April 29.

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