The Kansas House and Senate came together late last night to pass SB 37 with slightly higher tax rates that reduce the cost by $124 million over four years, but Governor Kelly says she will veto it.
SB 37 raises the rates from 5.15% to 5.2% on the first $23,000 single / $46,000 married and from 5.55% to 5.57% on taxable income above those levels. The vote was 108-11 in the House and 25-9 in the Senate. Both chambers passed the bill by larger margins than the previous bill Kelly vetoed (HB 2036), although some legislators in both chambers were absent and didn’t vote.
SB 37 hits the Governor’s target of approximately $433 million tax savings in the outlying years, but she now claims it to be “unsustainable” because the Legislature passed other tax bills. The Legislature overrode two vetoes of small tax cuts. HB 2098 reduces the sales tax on certain car purchases and creates a sales tax exemption for veterans starting in 2026. HB 2465 allows taxpayers to set money aside in tax-free savings accounts to be used for adopting children and provides a tax credit for contributions to pregnancy centers.
The state would have more than $2.7 billion left in reserves through FY 2029 with SB 37, based on previous calculations from the Kansas Legislative Research Department, and far more than necessary to be considered affordable. Governor Kelly won’t provide a target for cash reserves or spending increases, but SB 37 will not prevent the state from funding essential services unless she is planning more large spending increases, which is likely to be the case. After all, General Fund spending has increased 57% since she took office.
The Legislature normally has 30 days to override a veto, but it has adjourned for the year.
Will Lawrence, Kelly’s chief of staff, says she will call a special session within a month so the Legislature can give her what she wants, even though she won’t say exactly what her targets are for spending and cash reserves.
