Kansans will continue to pay sales tax on food to the state through the end of 2024.
Gov. Laura Kelly told the Post in an interview the day before the start of special session in Topeka that despite her desire to phase out state food sales tax by July 1, a new tax relief bill that she and legislative leadership came to a compromise on will not cut state sales tax on food earlier than Jan. 1, 2025.
The new full tax relief measure that Kelly, a Democrat, and Senate President Ty Masterson and House Speaker Dan Hawkins, both Republicans, hammered out late last week will be presented to the full legislative body during the special session that begins Tuesday.
Kelly vetoed three prior tax relief bills during this year’s regular session, describing those proposals as “just too expensive,” and called for a special session to nail down tax reform.
Kelly said she called the special session not because of politics, but because the legislature failed to develop “a fiscally responsible, sustainable tax plan” by April.
“There is absolutely no way that I was not going to get a tax cut package this year for Kansans,” Kelly told the Post in an interview Monday. “We’ve put it off for two years now, and we just couldn’t put it off any longer. It just wasn’t fair.”
What is in this new tax bill?
Kelly said the latest tax relief bill meets her threshold for fiscal sustainability.
While she wants to provide “robust tax relief for Kansans,” Kelly said, she also wants to prevent the state from going “back to the Brownback days” of no money to pay bills, no infrastructure improvements or investments.
According to the Kansas Reflector, the new compromise bill would cost roughly $540 million in state revenues the first year, then drop off to between $423 million and $427 million in three to five years after that.
The last of three tax bills Kelly vetoed during the regular session would have cut state revenues by $600 million in the first year. Kelly vowed during the session not to sign a bill that cost more than $425 million per year.
The new bill proposes the following, according to Kelly’s office:
- a move from three state income tax tiers to two, with the top rate decreased from 5.7% to 5.58% and the lower rate set at 5.2% (the current lowest 3.1% rate would be dropped entirely),
- an exemption from state incomes taxes on Social Security benefits,
- an increase in the personal property tax exemption for funding Kansas public schools from the current $42,000 to $75,000,
- and a doubling of the child tax credit from 25% to 50% of the federal credit.
The bill does not provide for as much property tax relief as Kelly would have liked, the governor said to the Post.
Kelly said she would have liked to see either a $100,000 or even $125,000 exemption for property taxes.
Now, this bill will come before the full slate of lawmakers called back to Topeka for the special session.
Some lawmakers on Monday expressed dismay with how the compromise bill was hashed out behind closed doors between the governor and legislative leaders.
But both Masterson and Hawkins predicted the bills would pass the Legislature, and Kelly has signaled her intent to sign it if it does get lawmakers’ approval.
How do the Chiefs and Royals play into this special session?
The Legislature is also expected to debate a plan to draw the Kansas City Chiefs and the Kansas City Royals to Kansas during the special session.
Legislative leaders say a bill that would allow the issuance of bonds to cover up to 75% of the stadium projects on the Kansas side of the state line is ready to go, but there needs to be interest from both chambers, KCUR reports.
The bill would include Sales Tax and Revenue — or STAR — bonds, which increase sales tax revenue from dollars spent within the designated project area and use that revenue to pay off the bonds.
STAR bonds were used to build Overland Park’s Prairiefire — a shopping, dining and entertainment district — at 135th Street and Nall Avenue. The bonds associated with that development are now in default after missing a key payment date in December 2023.
Kelly said she believes in economic development and that that state has to invest. It took incentives to bring Panasonic to Kansas, she said.
Kelly pointed to the Kansas Speedway, also built using STAR bonds, that generated enough sales tax revenue to pay off the bonds.
“STAR bonds, when it’s done right, and responsibly, it works, it works very, very well,” Kelly said. “I haven’t researched enough to know if the return on investment with something like an athletic stadium makes it a great investment, but I also know the way that STAR bonds work, it would not be done at risk to the state.”
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