Gov. Laura Kelly vetoed a major tax reform bill because it concentrated benefits on businesses rather than regular Kansans. (Kansas Reflector screen capture from U.S. House live video)
TOPEKA — Gov. Laura Kelly vetoed an $80 million tax reform bill Friday because she said it was unacceptably packed with special interest tax breaks championed by big business rather than focused on policy changes beneficial to regular Kansans.
Content of Senate Bill 8, which was approved on the final day of the 2023 regular session of the Legislature, included a controversial real and personal property tax exemption for fitness, restaurant and child care businesses claiming to be in competition with state or local government entities.
Wichita-based Genesis Fitness Clubs, a growing company operating at least 58 gyms in Kansas, Colorado, Nebraska, Missouri, Oklahoma and Iowa, spent heavily to lobby for the concept. The House and Senate approved the bill containing preferential tax treatment sought by Genesis despite the company being delinquent on $349,000 in property taxes in Douglas, Shawnee and Johnson counties.
The bundled bill emerged from GOP-led negotiations as a compilation of requests from special interests with leverage at the Capitol. It also prompted bipartisan predictions of a veto.
Senate Bill 8 featured a $14 million sales tax break on equipment and machinery purchases for benefit of Kansas telecommunications companies. There was the $10 million tax credit for individuals who incurred adoption expenses.
It included $10 million in tax credits for donors to nonprofit pregnancy centers or residential maternity centers that supporters indicated would be helpful in deterring women from getting abortions. It also had property tax relief for businesses engaged in agricultural tourism, including some provisions retroactive to 2021.
“After years of fiscal mismanagement and budget deficits, I am proud that we have balanced the budget four years in a row,” Kelly said. “As a result, we have seen record economic growth and have delivered over $1 billion in tax cuts for working families, property owners, veterans, farmers and ranchers. Instead of sticking with this fiscally responsible and bipartisan path, this bill prioritizes tax breaks for big businesses over everyday Kansans and would harm the budgets of local governments and schools.”
Senate President Ty Masterson, an Andover Republican, said veto of the tax bill as well as a separate public health bill was evidence the Kelly administration was governing from “the radical left and marching in tandem with Joe Biden.” He pointed to Kelly’s reelection campaign victory in November 2022, in which she promised voters her objective was to continue to lead the state as a political centrist.
“While the left is cheering today’s vetoes and the hold they have on this governor,” Masterson said, “it is certainly bad news for the vast majority of Kansans who expected her to keep her word to meet us in the middle.”
The bill was approved by the Legislature on votes of 76-43 in the House and 26-13 in the Senate. Those numbers fell short of the two-third majorities signaling supporters of the bill could override the governor if called back for a special session.
Kelly said the bill contained changes to the tax code she could have endorsed if they were to stand on their own merit, but the compilation was weighed down with misguided policy.
“While Senate Bill 8 includes tax cuts and personal property tax reforms that I support, by bundling 12 bills together the Legislature has made it impossible to sort out the bad from the good,” the governor said.
Earlier in the 2023 session, Kelly vetoed another tax bill that included a speedy elimination in the state sales tax on groceries, which the governor aggressively supported. The veto was tied to Kelly’s refusal to endorse adoption of a flat-, single-rate state income tax that would have provided the greatest financial benefit to the most wealthy of Kansans.
House Speaker Dan Hawkins, a Wichita Republican, said the governor’s latest veto represented a rejection of tax policy useful to growing the economy. He said the bill would have delivered property tax relief to veterans and incentives to assist Kansans with disabilities to secure jobs.
He asserted the root of opposition by Kelly and Lt. Gov. David Toland was the millions of dollars in tax benefits offered centers operated to convince women to avoid abortion.
“The Kelly/Toland administration has once again axed the tax cuts and vetoed SB8 … because of their irrational focus and political bias against helping vulnerable new mothers,” Hawkins said.
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