The Kansas Senate balked at an opportunity Tuesday to vote on override of Gov. Laura Kelly’s veto of a tax bill beneficial to multinational corporations, people interested in itemizing on state tax returns and critics of the state’s sales tax on food.
Majorities in the House and Senate sent the tax legislation to the Democratic governor despite indications it would be rejected. On March 25, Kelly used her veto authority for the first time to spike Senate Bill 22.
Senate President Susan Wagle, R-Wichita, said the Senate and House were interested in challenging Kelly’s veto. The bill would shrink state tax revenue by $210 million in the upcoming fiscal year and lower state revenue by $505 million over a three-year period.
“We still have time. Things are just now coming together,” she said.
It isn’t clear whether the 30-day statutory window for taking up the veto override started March 26, in conjunction with Kelly signing the veto document, or on Tuesday, when the governor’s veto message was formally read aloud in the Senate chamber.
An override would require backing from 27 of the 40 senators — the constitutionally mandated two-thirds majority — before moving to the House. In that chamber, affirmative votes from 84 of 125 representatives would be necessary to complete the maneuver. The bill was adopted 24-16 by the Senate and 76-43 by the House in March.
Sen. Tom Holland, D-Baldwin City, said Republican leadership in the Senate would be expected to attempt an override when confident of success. He said the attempt Tuesday was apparently scuttled because of insufficient votes.
Under the bill, the statewide sales tax on food as defined by the U.S. Department of Agriculture’s food stamp program would drop 1 percentage point to 5.5 percent on Oct. 1. The provision would cost the state an estimated $43.5 million annually.
Decoupling the state and federal tax code to allow flexibility to individual taxpayers would reduce state revenue $50 million each year. The change would be apply to the 2018 tax year. An estimated 18 percent of Kansans itemize deductions. About half of those filers have household incomes under $100,000 per year.
Broadening of the state’s online sales tax law would generate $21 million each year from out-of-state retailers and businesses with more than $100,000 in gross sales in Kansas.
The largest portion of the bill would deliver $81 million annually to multinational corporations by exempting from state taxes overseas revenue brought back to the United States. Passage of a lower federal tax on foreign income incentivized large companies to repatriate the cash. The bill also created a $53 million tax cut related to business interest deductions and a cut of $2.7 million for Federal Deposit Insurance Corp. premium deductions.
“I clearly would vote to override,” said Sen. Ty Masterson, R-Andover. “It would be to protect the people from a tax increase. We’re in a unique situation after the federal changes that inaction creates a tax increase.”
He said Kelly’s opposition to the bill was “your typical progressive liberal view in the sense that tax money is ‘our’ money, the government’s money.”
He said the Senate and House could consider an alternative bill limited to the multinational corporations’ income and itemizing on state tax returns while taking the inflated standard deduction on federal returns.
Kelly said in her veto message that the bill would complicate the state’s work to recover from financial damage of the 2012 income tax cuts that were repealed in 2017. Healing the “unprecedented devastation” to state agencies and programs will take years, the governor said.
“Our recovery is tenuous. Our budget is fragile. The state of Kansas cannot afford to make a U-turn,” Kelly said. “Unfortunately, Senate Bill 22 would absolutely dismantle all the progress we’ve made.”
This article was originally published on The Topeka Capital-Journal website, here.
Paid for by The Senate Democrats Committee, Kerry Gooch, Treasurer.