Gov. Laura Kelly on Friday vetoed SB 50, legislation that would have reversed state tax increases resulting from the 2017 federal tax cut.  A large portion of the nearly $100 million in annual tax relief in Senate Bill 50 is returning what has been described as a ‘found wallet.’  The 2017 Congressional tax relief bill reduced federal taxes but the changes cause some people and businesses to pay more state tax.  The higher standard federal deduction prompted people to use that instead of itemizing deductions, but that prevented them from itemizing for state purposes.  Senate President Ty Masterson and others say it’s like the State of Kansas found a wallet with taxpayers’ money on the sidewalk and kept it

Kelly vetoed similar legislation last year as well.  Her action Friday keeps alive her long-running streak of growing government by voting for tax increases and vetoing tax relief.

In her veto announcement, Kelly said tax relief would be financially irresponsible.

Kansas Policy Institute CEO Dave Trabert says the only financial irresponsibility is Kelly’s runaway spending.

“The governor’s 2022 proposed budget was a 29% spending hike over record-setting spending in 2017.  That’s almost $2 billion more since she voted for the largest tax increase in state history in 2017.”

Kansas Policy Institute owns the Sentinel.

Chamber says Kelly not serious about creating jobs

The state chamber of commerce blasted Kelly’s veto, saying she’s not serious about creating jobs.

“It’s clear there’s no serious interest in creating a climate to attract new investment for Kansans to obtain access to high-quality, private sector jobs,” said Alan Cobb, President of the Kansas Chamber. “In baseball terms, Kansas has the best farm system in the nation. We train the best, brightest and most hard-working, only to lose them to free agency to states where those jobs exist.”

Private-sector job growth in Kansas was nearly the worst in the nation since the 2017 tax increase.  Jobs only increased by 1.3% between 2016 and 2019, ranking Kansas #45 in the nation.

The 2017 Trump windfall, as it’s commonly called, provided fresh revenue to Kansas’s budget, because it nearly doubled the income tax standard deduction. Kansas law prevents income taxpayers from itemizing state income taxes if they don’t itemize their federal returns. The result? Many taxpayers received a federal tax cut, but paid more in state income taxes.  Kansas also began taxing businesses on foreign income as a result of the federal changes.

Lawmakers labored since 2018 to pass the tax savings through to individual taxpayers, but all efforts met the business end of Kelly’s veto pen.

“She looks out for the tax spender, not the taxpayers,” said Sen. Caryn Tyson, a Parker Republican and chair of the Senate Tax Committee. “She has demonstrated she is willing to increase taxes wherever and however she can by not putting the taxpayers’ money back into their pockets as the 2017 tax cut intended.”

Bipartisan majority passes the proposal

A bipartisan majority in the Senate passed the legislation, but Kelly told reporters that the tax cut is an irresponsible return to the era of previous Gov. Sam Brownback and his 2012 tax cuts. Cobb disagrees.

“Senate bill 50 was a responsible tax reform bill with a total impact of 1% of state annual revenues,” Cobb said. “To say this was irresponsible or unaffordable is simply dishonest.”

Tyson said the legislation benefits small businesses and modest-income individual taxpayers alike. In addition to allowing taxpayers to itemize on their state returns, the legislation helps small, brick-and-mortar businesses compete with large, online retailers, thanks to a sales tax provision. 

“It’s the middle-income person who got hurt by Kelly’s veto,” Tyson said.

Lawmakers are poised to override Kelly’s veto. The Senate adopted the bill with 30 votes and needs 27 for an override. Senate President Ty Masterson said that’s exactly what legislators will attempt in May.

Lawmakers to attempt veto override

“Senate Republicans stand with the middle-class families and main street businesses who pay the bills,” Masterson said in a press release. “We look forward to overriding the veto on their behalf when we return on May 3rd.”

Veto override is a heavier lift in the Kansas House, where 81 legislators approved the proposal but override requires 84. House leaders, however, voiced their frustration with the veto.

In a joint statement, House Speaker Ron Ryckman, House Majority Leader Dan Hawkins, and Senate Speaker Pro Temp Blaine Since said Kelly seems “confused about which administration we’re living in.”

“She is now governor and her continued insistence on higher taxes, depriving Kansans of the benefits of federal tax cuts and increasing the tax burden on Kansas employers is the only experiment we are suffering through,” the statement reads.

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