By NATE KING
Salina Post

Following several ceremonial bill signings in Leavenworth and Holton, Governor Laura Kelly called into Salina Post to discuss the current and long-term impacts of tax reform, the possibility of expanding Medicaid in 2025, her thoughts on the state’s current fiscal situation and the potential relocation of the Kansas City Chiefs across state lines.

After three years of debate over the best way to provide tax relief for the Sunflower State, Kansas lawmakers and Governor Kelly reached a bipartisan agreement this summer during a special session of the Kansas Legislature.

Senate Bill One

Although it took years for tax reform to be implemented in Kansas, Governor Kelly’s administration has been pursuing this reform since taking office in 2019. The bill, Senate Bill One, proposes a $2 billion cut in state income and property taxes over the next five years.

“I’ve wanted to create tax relief for such a long time. It took several legislative sessions for us to come to a consensus,” said Governor Kelly. “There was a lot of pressure to create a lot more on the income tax, which tends to benefit people with more wealth. I wanted a tax bill that really targeted our middle class and working families across the state of Kansas.”

Attempts by Republicans in the House and Senate to pass a single income tax were thwarted by Governor Kelly’s veto, followed by several failed votes to override the veto.

According to the Institute on Taxation and Economic Policy, a flat tax structure would have cost the state $650 million annually if phased in, and from Governor Kelly’s perspective, its adoption would have been a throwback to the Brownback era.

“The flat tax would take us back to the Brownback era, and I just couldn’t let that happen,” said Governor Kelly. “At that time, we had a three-tier tax system. I still believe we should have kept a three-tier tax system. It’s fair, but it’s also flexible. When it’s like that, in bad economic times – and there are – you don’t get a drop in government revenue like you do when you have fewer tax brackets, especially just a single tax bracket.”

Lawmakers passed Senate Bill 1 on June 18. The final votes in the Kansas Senate and House of Representatives were 34 to 4 and 121 to 2, respectively.

The Senate’s first bill proposes a two-tier income tax system for married couples filing jointly. Income up to $46,000 is taxed at 5.2%, and income above that is taxed at 5.58%.

Governor Kelly noted that one of the key changes made by the Senate’s first bill is the increase in the personal exemption amount, which rises from $2,250 to $9,160 for individuals.

Taxpayers will receive an additional exemption of $2,320 for each dependent listed on their tax return. The bill provides a slight increase in the standard deduction, with the exemption for single filers increasing from $3,500 to $3,605 and for married filers from $8,000 to $8,240. For heads of household, the exemption will increase by another $180, from $6,000 to $6,180.

“SB 1 will impact everyone, at least to some degree. I think our retirees will get the biggest relief because we’re going to eliminate all state taxes on Social Security,” said Governor Kelly.

In addition, with this law, Kansas, along with more than thirty other states, has eliminated state Social Security contributions.

Income taxes and Social Security aren’t the only ways Kansas residents can save. The law also reduces property taxes by increasing the exemption of property tax mill levies from the general school fund.

“The property tax for Kansas residents who own property will be reduced by the state. We currently impose 20 mills on residential property to help fund our schools. Previously, we have exempted the first property value of about $42,000 from this tax, we are increasing that exemption to $75,000,” said Governor Kelly.

Governor Kelly said Kansas residents who want to start or expand a family would also benefit from the Senate’s first bill.

“Our families will be pleased to see the child care tax credit doubled to $6 million, which I think will make a huge difference, especially for families with many children,” Kelly said.

Medicaid expansion

From her time as senator for Kansas’ 18th Senate District to her tenure as governor, Kelly was a vocal advocate for expanding Medicaid, the federal program that provides health care to some 80 million low-income Americans.

“There is no good logical reason not to expand Medicaid,” said Governor Kelly. “When Medicaid expansion became available to states in 2014, I think there were legitimate questions about what impact it would have on the state budget.”

Governor Kelly emphasized the social and economic benefits of expanding Medicaid, which would cover an estimated 50,000 additional Kansas residents.

“There were very legitimate concerns. What would happen if the federal government cut off the funding after the expansion? But over time, all of the concerns were allayed,” said Governor Kelly.

Kansas’ decision not to expand Medicaid has resulted in over $7 billion in lost taxpayer money since the Affordable Care Act was passed in 2014.

“This just makes absolutely no sense and has really done serious damage to our economy,” said Governor Kelly.

Governor Kelly cited the 10 hospitals that have closed in Kansas since the federal government allowed Medicaid expansion as one reason why Medicaid should be expanded in Kansas.

“I’m not going to say that expanding Medicaid is the complete and total answer to our rural health care problems, but it’s certainly a tool we need to help solve those problems,” said Governor Kelly. “Another thing is very subtle and only noticed by people in these communities: As all the other states around us have expanded Medicaid, we’re losing health care workers across our borders.”

Medicaid expansion remains a contentious issue in Topeka, with Governor Kelly saying that politicians in the legislature are out of touch with their constituents when it comes to Medicaid.

“It really comes down to legislative leaders who are stuck in the past, still concerned about the passage of the Affordable Care Act more than 10 years ago, and they just can’t give up on the idea,” said Governor Kelly. “They said it was a bad idea at the time, and they’ve sort of backed themselves into a corner and haven’t found a way to get out of that corner and get their caucuses in the House and Senate to vote on expanding Medicaid.”

A popular argument among Kansas residents against expanding Medicaid is that it would result in higher taxes for middle- and low-income residents. According to Governor Kelly, states that have expanded Medicaid have not seen any negative impact on their tax structures.

“In fact, they found that premiums have actually stabilized for people who get their health insurance through the private sector,” said Governor Kelly. “Expanding Medicaid would compensate our hospitals for providing care to these Medicaid-eligible people.”

Governor Kelly explained that when hospitals provide uncompensated care in the emergency room – the most expensive place to receive health care – they must charge other patients higher fees to cover those costs.

“They’ve been supplying the emergency room, the most expensive place to get medical care. So hospitals have to charge other patients more money to cover the cost of this uncompensated care that they have to provide in the emergency room. And when they charge other patients more money, insurance companies raise premiums, and the cost of premiums goes up for every Kansas resident with private health insurance.”

In 2023, a poll released by the Sunflower Foundation found that 68% of Kansas voters supported expanding Medicaid.

“There is no good reason. We just have to keep pushing and hope that the pressure on the legislative leadership becomes so great that members of their caucus demand the opportunity to vote on Medicaid expansion,” said Governor Kelly.

Kansas City Chiefs

Tax reform wasn’t the only agenda item at this summer’s special session. Lawmakers also changed existing economic incentive rules to give the state the opportunity to potentially attract professional sports teams — such as the Kansas City Chiefs. Gov. Kelly had little to say on the issue, but said she welcomed lawmakers expanding the economic toolbox.

“As we look to the future of Kansas and an opportunity presents itself, I think it’s good that we now have a tool to take advantage of it,” she said.

Governor Kelly said the Kansas City Chiefs have made it clear that they will make a decision regarding their location by the end of the year at the latest.

“We are here and we have the tools we need,” said Governor Kelly.

Governor Kelly comments on Minnesota Governor and Vice Presidential candidate Tim Walz

Governor Kelly praised Vice President and Democratic presidential candidate Kamala Harris’ own vice presidential running mate and noted the balance Walz brings to the ballot.

“She couldn’t have picked a better partner. Someone who would balance the electoral slate,” said Governor Kelly. “She’s from the coast. He’s from the Midwest.”

Governor Kelly said she has gotten to know Walz over the past few years and believes he is “as good, kind and humble as one can be.”

“You couldn’t ask for anyone with a better resume and personality to work side by side with,” she said.