Governor Laura Kelly vetoed major tax legislation on Monday fiercely advocated by Republicans to reduce the tax obligations of multinational corporations and high net worth individuals, while reducing the sales tax on food and expanding the sales tax on food. non-resident Internet businesses.
The Democratic governor has repeatedly denounced Senate Bill 22 after clearing House 76-43 and the Senate by a 24-16 margin. Lobbyists from three professional organizations, including the Kansas House, immediately asked for a waiver of Kelly’s veto. The governor said she was convinced the GOP legislative branch could not find 84 votes in the House and 27 in the Senate for a waiver.
Kelly first used his authority as governor to thwart a bill capable of slashing state revenues by about $ 500 million over three years.
“It would plunge our state once again into a self-inflicted budget crisis, cutting back all the investments we have worked so hard to rebuild and restore,” she told Capitol Hill. “It would once again jeopardize our future in order to give significant tax benefits to entities that need them least, while continuing to leave working families behind.”
Senate Speaker Susan Wagle, a Republican from Wichita, said the bill would have prevented unintentional tax increases on businesses and individuals created by a federal law signed in 2017 by President Donald Trump. She said Senate Bill 22 was important because it reduced Kansas’ food sales tax rate – among the highest in the country – by 1 cent on the dollar.
“Laura Kelly showed us how much her words mean a lot,” Wagle said. “With the veto of Senate Bill 22, Governor Kelly broke his campaign promise not to impose new taxes and his commitment to reduce the sales tax on food.”
Minority Parliamentary Leader Tom Sawyer, D-Wichita, said he praised Kelly “for her bravery in the face of immense pressure and for protecting our state. This veto was necessary to ensure economic recovery and sustainability. in Kansas “.
Kelly was elected in November and took office in January while pledging not to repeat the “reckless” tax policy decisions of Governor Sam Brownback, who resigned in 2018. At a press conference, Kelly said she would consider alternative tax bills during the 2019 session if they were revenue neutral.
The income tax provisions incorporated in Senate Bill 22, related to a cash tax boon intended for the public treasury due to the domino effect of changes at the federal level, were developed by a special Senate committee chaired by Wagle.
The house included adjustments to the Kansas sales tax, including a potentially flawed amendment linking purchases at the 5.5 percent sales tax rate to products available for purchase with food stamps. The amendment drafted by Rep. Ken Corbet, R-Topeka, could prevent Kansas from complying with a multi-state sales tax deal and cost the state $ 18 million.
Kelly approved a phased reduction in the 6.5% sales tax on food and did not object to some sales taxes being paid by businesses without a physical presence in Kansas.
She objected to tax avoidance coins offering Kansas businesses around $ 150 million. The main beneficiaries would be multinational corporations, including Cargill and Seaboard, eager to repatriate foreign income at a reduced federal tax rate and without paying Kansas income tax.
The bill would also decouple the state and federal tax codes in a way that would encourage no more than 15% of individual tax filers in Kansas to take advantage of the new larger standard deduction on federal tax forms and continue to itemize deductions for the purpose of paying state taxes. This part of the bill would cost the state $ 50 million to $ 60 million per year.
Senate Majority Leader Jim Denning of R-Overland Park said the governor ignored an opportunity for bipartisan compromise by turning to the veto “because she doesn’t like 25% of the bill “.
In doing so, Kelly compared Senate Bill 22 to Brownback’s unfortunate 2012 decision to sign a bill reducing state tax obligations of 330,000 business owners and lowering personal tax rates. . The law strangled state revenues as Kansas’ economy collapsed, throwing Brownback into years of budget trouble. In response, the state sales tax was increased twice, $ 2 billion was cut from the highway program, and government borrowing skyrocketed.
The Brownback tax program was repealed in 2017, and state revenues rebounded to provide the 2019 legislature with liquidity to make targeted investments.
“We must not waste the surplus. We must be careful,” said Senate Minority Leader Anthony Hensley, D-Topeka.
House Majority Leader Dan Hawkins, R-Wichita, said Kelly was guilty of “speaking out against responsible legislation preventing tax hikes, calling her ‘Brownback 2.0.'” Hawkins said Kelly lacked standing with Kansas voters to veto the tax bill because she “was not elected in a landslide and has no mandate.”