It took four years, but lawmakers yesterday overrode Governor Kelly’s veto of legislation that will reverse unintended state tax increases from the 2017 federal tax cut relief bill. The legislation will provide nearly $100 million in annual tax relief to Kansans. It increases the standard deduction and allows state income tax filers to itemize on their state returns regardless of whether they itemize on their federal returns.
Lawmakers labored since 2018 to pass the tax savings through to individual taxpayers, but the proposals met the business end of Kelly’s veto pen three times. Finally, both the House and Senate overrode her veto.
Kelly called the legislation “fiscally irresponsible. The Senate voted 30-10 to override the veto while the House voted 84-39 to override it. The handful of lawmakers who supported the veto argued that the proposal blows a hole in the state’s budget. The fiscal note revealed the state would lose less than $100 million per year over the next three years.
Sen. Caryn Tyson, chair of the Senate tax committee, noted that the most recent revenue reports revealed the state collected $232.8 million more than estimated.
“We are collecting more taxes in this state than we ever have,” Tyson said.
The federal tax cuts provided a windfall to state coffers because the federal law doubled the income tax standard deduction. Kansas law prevented income taxpayers from itemizing on state income taxes if they didn’t itemize on federal returns. As a result, many taxpayers received a federal tax cut, but paid more to the state.
Critics also argued that the legislation provides tax benefits to corporations. The new law also provides a tax break to corporations that bring money home from offshore. Kansas didn’t tax foreign income previously, so it’s money the state would otherwise never see, Tyson explained.
“This would encourage that money to come home to Kansas,” she said.
The bulk of the fiscal note is money returned to Kansas taxpayers.
“This bill helps almost every Kansan who takes the standard deduction,” said Senate President Ty Masterson. “It fixes several issues that became tax increases.”