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Special session results in a tax cut package that Kelly can live with
On Tuesday, the Legislature passed a tax package that Governor Laura Kelly indicated she would sign. This package, which is expected to cost around $2 billion over the next five fiscal years, includes significant changes such as a two-tiered income tax structure, increased standard deduction and personal exemption, elimination of taxes on Social Security, and an expanded tax credit for child and dependent care.
Since the Legislature adjourned on April 30, leadership has held negotiations with the Governor’s office and walked into the statehouse this week with an agreement that Kelly promised to sign if it got to her desk.
While Senate Bill 1 bears a resemblance to the last tax bill she vetoed, lawmakers made small tweaks to bring the price tag down from $1.49 billion over three years to $1.23 billion. According to the Governor, this new fiscal note is more sustainable for the state’s budget and doesn’t pose a risk to future funding for public schools, healthcare, and infrastructure, ensuring the stability of these key sectors.
While some legislators attempted to amend the bill on the floor, both chambers were strongly encouraged not to risk the fragile compromise reached with the administration. The Senate passed the bill first by a vote of 34-4 after the debate was cut short by a procedural motion and before any amendments could be prepared. The House also passed the bill clean by a vote of 121-2
The bill moves the state to a two-tiered income tax structure, 5.2% and 5.58%, increases the standard deduction and personal exemption, eliminates taxes on Social Security, increases the property tax exemption to $75,000 for the statewide mill levy, and expands the tax credit for child and dependent care to 50%. It is missing the expedited buydown of the food sales tax, which the state will fully eliminate in January 2025.
Governor Kelly’s annual ceiling for total tax cuts is $425 million. The new tax agreement, alongside cuts from other bills, meets this threshold, with projected fiscal impacts as follows:
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Fiscal year 2025: $540.8 million
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Fiscal year 2026: $415.1 million
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Fiscal year 2027: $423.5 million
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Fiscal year 2028: $426 million
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Fiscal year 2029: $427.5 million
Kansas lawmakers pass plan to lure Chiefs and Royals across the border
The Legislature also passed House Bill 2001, an incentive bill to recruit the Chiefs and Royals to relocate to Kansas. The bill passed on a vote of 84 to 38 in the House and 27 to 8 in the Senate.
The bill amends the existing STAR Bond program to allow up to two projects involving major professional sports complexes, requiring a $1 billion investment per project and a minimum 30,000-seat capacity for each stadium. The bill allows revenue bond financing up to 70%, allowing repayment to come from sales, liquor, and transient guest taxes collected in the STAR Bond district. The bill also extends the repayment
period from 20 years to 30 years.
Local incentives are not required, but if the local government chooses to participate in the project, it will have 60 days to assemble an agreement. The bill includes guard rails requiring project approval from the Legislative Coordinating Council (LCC) and the Secretary of Commerce.
Finally, the Senate Committee on Assessment and Taxation, during a hearing before the start of the Special Session, considered a Constitutional Amendment to cap property valuations at 4% or lower, as determined by the Legislature. Neither the House nor the Senate took up the Constitutional Amendment, so this proposal will remain an issue for the 2025 Legislature.
The 2024 Legislative session has officially adjourned for the second time, and lawmakers now head home for a busy election cycle in which all House and Senate seats are up for election.
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