Another tax plan, another choice.

For the second time this year, Gov. Laura Kelly must decide whether to veto far-ranging legislation that would upend how – and how much – Kansans pay in income taxes. The Democratic governor’s determination may hand lawmakers in both parties an election year victory, or kick off a new round of conflict over taxes with no clear resolution.

Over the weekend, the Legislature sent Kelly a sweeping tax plan that would take the state from three personal income tax brackets to two and implement a host of other changes, including eliminating income taxes on Social Security benefits. The annual cost to state revenues is estimated at $635 million the first year and roughly $460 million each year after.

In January, Kelly vetoed a tax package passed largely with Republican votes that would have set a single income tax rate. By contrast, the new proposal enjoyed bipartisan support but divided Democrats. While passing the House 119-0, it cleared the Senate 24-9, with some Democrats opposed. Only one Republican voted no.

Kelly, more than a year into her second term, has built her time in the governor’s office on promises to never take Kansas back to the budget crisis under former Republican Gov. Sam Brownback, whose signature income tax cuts left the state struggling to pay for expenses. She has also called for tax cuts amid the growth of the state’s massive cash reserves, fueled in part by federal pandemic aid.

Whether Kelly judges the most recent tax measure financially sustainable may determine its fate – and the answer is potentially “no.”

Earlier in the week, before the Legislature passed the tax plan, lawmakers considered a different proposal that would have maintained the three-bracket structure and cost less. The bill passed the Senate but hit a wall in the House. Hours before the vote, Kelly addressed House Democrats in an unsuccessful effort to generate support for the proposal, which she had endorsed.

During her speech, Kelly set down markers that now suggest she may find the new tax plan heading to her desk too costly.

“I think most important to me, quite honestly, is the fact that we’re able to do these cuts but still have – in a fiscally responsible way. This is sustainable,” Kelly told the gathering of House Democrats on Thursday.

“We had a cap, a ceiling, on the amount we could cut taxes and still be able to operate – fund our schools, fund our roads, fund our water plan. All of those kinds of things. We had a cap, and that was $425 million in the out year, in fiscal year ‘29.”

The bill eventually approved by lawmakers runs about $460 million a year after the first year, upwards of $35 million higher than Kelly’s ceiling. On Friday night, Kelly’s chief of staff, Will Lawrence, reiterated the $425 million cap to reporters, though he cautioned he wasn’t saying what action the governor would take.

The concerns didn’t persuade most lawmakers.

“Typically, when we look at the fiscal impact, we go out about three years,” Rep. Adam Smith, a Weskan Republican who chairs the House Tax Committee, said of the process of crafting legislation. “When we’ve been looking at this tax cut plan, we’ve been looking out to five years just to make sure that we are sustainable and fiscally responsible.”

Kansas is one of numerous states weighing tax cuts. In 2024, at least 14 states, including Missouri, have income tax reductions taking effect, according to the Tax Foundation, a Washington, D.C.-based think tank that advocates for tax reform. Ohio and Montana are consolidating tax brackets and Georgia is adopting a flat tax.

A large amount of bracket consolidation has taken place across states in recent years, said Katherine Loughead, a senior policy analyst and research manager at the Tax Foundation. States collectively had more than 200 tax brackets in 2018, compared to 158 today.

“It’s prudent that lawmakers in Kansas are trying really hard to make sure that this is sustainable, that there is enough revenue currently and in the future to support these cuts. And there really is,” Loughead said.

The proposed tax cuts are small compared to the amount of revenue growth the state has seen over the past several years, Loughead added, and are comparable to cuts made by roughly half of all states in recent years.

The legislation would tax income at rates of 5.55% in the top bracket and 5.15% in the bottom bracket. For individuals, $23,000 a year in taxable income marks the dividing line between the two rates; $46,000 for married couples filing jointly. Under current Kansas law, the tax brackets are set at 3.1%, 5.25% and 5.7%, with individuals making over $30,000 a year in taxable income taxed at the top rate.

The bill raises the personal exemption allowance amount from $2,250 for all taxpayers to $18,320 for married couples filing jointly and $9,160 for everyone else. Each dependent would lead to an additional $2,320.

The measure also eliminates taxes on Social Security income, lowers the statewide mill levy for schools from 20 mills to 19.5 mils and accelerates the elimination of the state sales tax on food to July 1, six months ahead of current law.

Kelly will face pressure to sign the bill. Even though the measure doesn’t go as far as the flat tax supported by GOP lawmakers earlier this year, Republicans and other supporters of a flat tax are backing the latest proposal.

“Governor Kelly should sign this compromise and make good on her claims to want tax relief for our state. Vetoing another tax bill means she is unserious and uncommitted to the families in our state,” Elizabeth Patton, state director of Americans for Prosperity-Kansas, a group linked to Charles Koch, said in a statement.

If Kelly vetoes the measure, she risks significant numbers of Democrats joining Republicans to override the veto in the House. At a minimum, a veto would put House Democrats in an awkward situation, forcing them to weigh whether to reverse their previous support for the bill and side with Kelly.

During a caucus meeting Friday night, Rep. Mari-Lynn Poskin, a Leawood Democrat, asked if Kelly supported the package. “I am not interested in being part of a revolt or a splintering with the governor who pulled us out of the Brownback bankruptcy tax experiment,” Poskin said.

House Minority Leader Vic Miller, a Topeka Democrat, replied that “indications are the governor is not happy with it” but added he hadn’t received official word Kelly opposed the measure.

Republicans would likely have the votes necessary to override a possible veto, as long as every House Republican who voted for the bill supports override along with Rep. Marvin Robinson, a Kansas City, Kansas, Democrat who often votes against the governor.

In the Senate, five senators – all Republicans – missed the tax vote. Override supporters would only need to win over three. Additionally, Sen. David Haley, a Kansas City, Kansas, Democrat who passed on voting on the measure, had previously flirted with voting to override Kelly’s veto of the flat tax.

Kelly could potentially sidestep the issue by signing the bill – or allowing it to become law without her signature – and then line-item vetoing spending from the state budget to compensate for the cost of the tax package. Lawmakers sent Kelly a budget on Friday.

A veto would almost certainly not be the end of the tax debate when the Legislature returns to Topeka in late April. Both Republicans and Democrats want to be able to run for re-election on having delivered tax cuts, and Kelly has promised to call the Legislature into special session if a tax plan she finds acceptable doesn’t pass.

The threat of a special session provides lawmakers an extra incentive to find a deal acceptable to Kelly. Kansas law prevents legislative candidates from soliciting contributions from PACs and lobbyists while the Legislature is in session. A special session during campaign season could prove highly disruptive to fundraising efforts, as well as keep incumbent lawmakers in Topeka away from their districts.

But for now, lawmakers wait.

“I see a future where this is probably going to get vetoed,” Senate Minority Leader Dinah Sykes, a Lenexa Democrat, said on Saturday.