Gov. Kelly discusses $2B tax reform bill, Medicaid expansion, national politics

By NATE KING
Salina Post

Following multiple ceremonial bill signing events held in Leavenworth and Holton, Governor Laura Kelly called Salina Post to discuss the present and long-term impacts of tax reform, the possibility of Medicaid expansion in 2025, her reflections on the state's current financial standing, and the Kansas City Chiefs’ potential move across state lines.

After three years of debate on how best to provide tax relief to the Sunflower State, Kansas lawmakers and Gov. Kelly reached a bipartisan deal during a special session of the Kansas Legislature this summer.

Senate Bill One

Although the process of delivering tax reform to Kansas took years to achieve, it has been something Gov. Kelly's administration has sought since she became governor in 2019. The bill, Senate Bill One, provides a $2 billion reduction in state income and property taxes over the next five years.

“I've been wanting to provide tax relief for that amount of time. It took multiple legislative sessions to come to a consensus," Gov. Kelly said. "There was a lot of push to provide much more on the income tax side, which tends to benefit people with more means. I wanted a tax bill that would really target our middle-class, working-class families across the state of Kansas."

House and Senate Republicans' attempts to pass a flat income tax were dashed by Gov. Kelly's veto, which was followed by subsequent failed veto override votes.

According to The Institute on Taxation and Economic Policy, a flat tax structure would have cost the state $650 million annually once phased in, and from Gov. Kelly's view, its enactment would have sent the state back to the Brownback years.

“It [flat tax] would start to take us back to the Brownback days and I just could not let that happen," Gov. Kelly said. "At that point, we had a three-tier tax system. I still believe we should have maintained a three-tier tax system. It's fair, but it's also nimble. By having that, when bad economic times come — and they do come; you don't see the kind of decrease in state revenues that you do if you have fewer tax brackets, particularly a single tax bracket.”

Lawmakers passed Senate Bill One on June 18. The Senate's final vote was 34-4 and 121-2 in the Kansas House of Representatives.

Senate Bill One establishes a two-bracket income tax system for married individuals filing jointly. Income up to $46,000 will be taxed at 5.2%, and income above that will be taxed at 5.58%.

Gov Kelly noted one of the crucial changes brought by Senate Bill One is the increase in the personal exemption, which goes from $2,250 to $9,160 for individuals.

Taxpayers will receive an additional $2,320 exemption for each dependent listed on their return. The bill accounts for a slight increase in the standard deduction, with single filers' deductions rising from $3,500 to $3,605 and married filers' rising from $8,000 to $8,240. Heads of household will see an additional $180 in exemptions going from $6,000 to $6,180.

"It [SB 1] will impact everybody to at least some degree. I think our seniors are going to see the most obvious relief because we will be eliminating all state taxes on Social Security," Gov. Kelly said.

Additionally, with this bill, Kansas joined more than thirty other states in eliminating state social security taxes.

Income taxes and social security aren't the only ways Kansans will see savings. The bill also reduces property taxes by raising the exemption on school general fund property tax mill levies.

"Kansans who own property will see a reduction in their property tax bill from the state. We levy right now, 20 Mills on residential property that is to help fund our schools. To date, we exempt the first $42,000 or so property value from that tax, we're lifting that exemption to $75,000," Gov. Kelly said.

Gov. Kelly said Kansans looking to start or grow their family also benefit from Senate Bill One.

"Our families will enjoy a doubling of the Childcare Dependent Care Tax Credit to $6 million, which will make a huge difference, I think, particularly for families with a lot of kids," Kelly said.

Medicaid expansion

From her days as a Senator representing Kansas' 18th Senate District to serving as governor, Kelly has been a strong advocate for the expansion of Medicaid, the federal government program providing care to some 80 million Americans living on low incomes.

"There's no good logical reason for not having expanded Medicaid," Gov. Kelly said. "Originally, when Medicaid expansion was available to states in 2014 I think there were some legitimate questions about what it would do to the state budget."

Gov. Kelly emphasized the social and economic benefits of Medicaid expansion, which would cover an estimated 50,000 more Kansans.

"There were very legitimate concerns. What would happen if the federal government, you know, pulled the plug after you've done expansion. But over time, all of the concerns have been answered," Gov. Kelly said.

Kansas' decision not to expand Medicaid has forfeited over $7 billion in taxpayer money since the passage of the Affordable Care Act in 2014.

"That just makes absolutely no sense and has really done some serious harm to our economy," Gov. Kelly said.

Gov. Kelly cited the ten hospitals that have closed in Kansas since the federal government made Medicaid expansion available as one reason why Medicaid should be expanded in Kansas.

"I'm not going to say that Medicaid expansion is the complete and total answer to our issues with rural health care, but it certainly is a tool that needs to be in the toolbox in order for us to resolve those issues," Gov. Kelly said. "The other thing that's very subtle, and only people in those communities notice it, but because all of the other states around us have expanded Medicaid, we are bleeding healthcare workers across our borders."

Expanding Medicaid continues to be a point of contention in Topeka. Gov. Kelly said leaders in the statehouse are out of touch with their constituents in their thinking on Medicaid.

"It has really come down to having legislative leaders who are stuck in the past, who are 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," Gov. Kelly said. "They said, then it was a bad idea, and they sort of painted themselves into a corner, and have not figured out a way to come out of that corner and let their caucuses in the House and in the Senate, take a vote of Medicaid expansion.”

One of the popular arguments used by Kansans against the expansion of Medicaid is that it will raise taxes on middle and low-income Kansans. According to Gov. Kelly, states that have expanded Medicaid haven't seen a negative impact on their tax structures.

"In fact, what they have seen is that premiums for people who get their health insurance through the private sector actually have stabilized," Gov. Kelly said. "Because of Medicaid expansion, our hospitals would get reimbursed for the care that they provide to these people who are eligible for Medicaid."

Gov. Kelly explained that when hospitals provide uncompensated care in emergency rooms, the most expensive place for healthcare, they have to charge other patients more to cover those costs.

"They provided in the emergency room, the most expensive place to get health care, and so hospitals then have to charge other patients more money to cover the costs of that uncompensated care that they have to provide in the emergency rooms and when they charge other patients more money, the insurance companies raise the cost of the premium, and premium costs go up for every Kansan with private healthcare."

In 2023 a survey released by the Sunflower Foundation found 68% of Kansas voters supported Medicaid expansion.

"There's no good reason. We just need to continue to push and hope that the pressure on legislative leadership gets to the point that their caucus members demand the opportunity to vote on Medicaid expansion," Gov. Kelly said.

Kansas City Chiefs

Tax reform wasn't the only item on the agenda for the special session this summer. Lawmakers also modified existing economic incentive rules to enable the state to potentially attract professional sports teams — like the Kansas City Chiefs. Gov. Kelly had little to share on the topic, but said she appreciates the legislature expanding the economic tool box.

"I think as we look to the future in Kansas, if an opportunity should come our way, it's nice that we now have a tool in place to make that work,”she said.

Gov. Kelly said the Kansas City Chiefs have made it clear they will make a decision regarding their location no later than the end of the year.

"We're here, and we've got the tools in place," Gov. Kelly said.

Gov. Kelly comments on Minnesota Governor and vice presidential candidate Tim Walz

Gov. Kelly praised Vice President and Democratic candidate for president Kamala Harris' own vice president pick, citing the balance Walz brings to the ticket.

"She could not have picked a better partner. Somebody that balances the ticket," Gov. Kelly said. "She's coastal. He's Midwest."

Gov. Kelly said she has gotten to know Walz over the last few years, and according to her, Walz is "as good and kind and humble as they come."

“You could not ask for somebody with a better resume and a better personality to work side by side with,” she said.