The legislature passed a responsible tax relief package with a strong bi-partisan vote that is likely to be signed by Governor Kelly. So-called flat tax schemes that we have testified against did NOT prevail. The Language that we asked for to signal legislative intent to use state general fund dollars to “backfill” reductions to local tax revenues WAS included. Kansas will see some level of tax relief and school funding revenue sources are held harmless. These are wins.

The Kansas Legislature wrapped up the 2024 special legislative session on Tuesday after about nine hours. Governor Kelly called lawmakers back after she vetoed Senate Bill 37, the latest in a string of failed attempts to pass a tax reform package during the 2024 regular legislative session. 

Legislative leaders clashed with Governor Kelly on the issue of tax policy early and often during the regular session. Given the fact that 2024 is an election year and that the fiscal health of Kansas has left the state coffers strong, there was widespread agreement amongst elected officials of all political stripes that a tax reform package needed to pass this year. That seemed to be where the agreements ended.

Early disagreements were over the number of tax brackets in Kansas’ tax structure. Republicans wanted a flat tax where all taxpayers, regardless of their income level, paid the same rate. Democrats wanted more of the status quo with a progressive bracket system that included 3 brackets where the tax rate increased as the taxpayer’s income level increased.

The Republican wishes for a flat tax were squashed after an early veto, and the debate then focused on the size and amount of the tax cut. 

Republican talking points focused heavily on the side of larger tax cuts. Democratic talking points focused on restraint citing the not-so-distant memory of the Brownback years.

In the end, the two sides finally came to a compromise that included:

  • A two-bracket system (current law is three)
  • An increase in the standard Deduction to $3605/single, $8240/married-joint.
  • An increase of the personal exemption:  $9160/single, $18,320/married-joint.
  • An elimination of the state income tax on Social Security benefits.
  • An increase in the Household and Dependent care credit to 50% of the federal amount (up from 25% currently)
  • Tax breaks for banks mirror the corporate income tax reductions. Banks pay a “privilege” tax and not an “income” tax. 
  • An increase to the residential exemption from the state 20mills to $75,000 (up from $42,000). 
  • Language that provides for a demand transfer from the SGF to backfill the lost revenue to K-12 education from the change in order to hold schools harmless

The total cost of this package is about $1.232B over the next 3 years.

The two bullets that are bolded above were the main parts of the bill that we were following. This bill did not reduce the statewide mill levy for school funding.

The other highly publicized initiative that passed yesterday was a financial incentive package to lure the KC Chiefs and/or the KC Royals to the Kansas side of the state line. This package did not directly affect us.