“As Kansans feel the pain of rising costs, it’s clear that we need to cut taxes. This plan provides relief for middle-class Kansans, is fiscally responsible, and keeps seniors and families in their homes – which is why it’s garnered bipartisan support,” Governor Laura Kelly said. “The other tax proposal out there – the flat tax – does relatively little for the middle class. Kansans have seen how reckless tax experiments work out, and they don’t want to go back to the days of four-day school weeks, crumbling roads, and crippling debt.”

The plan:

Cuts state property taxes for Kansas homeowners.

The bipartisan tax plan exempts the first $100,000 in state property taxes for all Kansans homeowners. Once fully implemented, this proposal will save the Kansas homeowners around $100 million per year. 370,000 Kansas homeowners would pay less than $20 annually in state property tax.

“I congratulate Governor Kelly for including in her proposal raising the exemption for the 20 mill statewide school levy to $100,000 of appraised value,” House Democratic Leader Vic Miller said. “This is a great first step to providing long-overdue property tax relief to beleaguered Kansas homeowners.”

Entirely eliminates state taxes on Social Security income.

Kansas is currently one of eleven states that impose a state tax on Social Security benefits, resulting in seniors leaving the state in search of a lower tax burden. By eliminating the tax on Social Security income entirely, retired Kansans will save more than $525 million in the first five years of this plan.

“Kansans work hard to be able to retire and should be able to enjoy that time without worrying about how to make ends meet,” said Senator Dennis Pyle, Kansas Senate District 1. “There’s no reason for Kansas to remain a state that taxes its retirees. I’ve signed onto this plan because eliminating the tax on Social Security benefits is a commonsense way retired Kansans can stay close to family and not feel the need to move out of the state for tax relief.”

Increases the standard deduction so Kansans pay less when filing their state income taxes.

This plan increases the standard deduction that the vast majority of Kansans use to reduce their taxable income and overall tax bill. It raises the standard deduction for single Kansans from $3,500 to $5,000; for those with head of household filing status from $6,000 to $7,500; and for those married filing jointly from $8,000 to $10,000. This component of the plan will save Kansans over $200 million in three years.

“Working, middle-class Kansans deserve our support as they feel the pinch between their wages and the rising cost of living,” said Senator Rob Olson, Kansas Senate District 23. “By increasing the standard deduction, this bill lightens the tax burden on individuals and families while ensuring our budget stays balanced.”

Immediately axes the state sales tax on groceries, diapers, and feminine hygiene products.

This tax plan eliminates the state’s sales tax on groceries and ingredients by April 1 this year instead of waiting until 2025. It would also eliminate the state sales tax on diapers and feminine hygiene products.

“Kansans need us to deliver responsible tax relief that will help them afford their groceries and other necessities,” said Representative Brandon Woodard, Kansas House District 108. “The immediate elimination of the food sales tax is a commonsense plan that will put more money back into Kansans pockets now, instead of waiting until 2025.”

Provides relief for working families in need of child care.

Child care is a necessity for working parents. This tax cut package doubles the Child and Dependent Care Tax Credit that parents can claim to help pay for child and dependent care while they work or attend school. These tax credits are estimated to save Kansas families $18 million over three years.

“This is commonsense tax policy that will provide relief to all Kansas taxpayers. In particular, it will help more parents access affordable, high-quality child care,” said Senate Democratic Leader Dinah Sykes. “Child care is hard to find and hard to afford for too many Kansas families. That holds back moms and dads – and our economy. The child care tax credit included in this proposal is a win-win, helping employers attract better job candidates and ensuring all Kansans have the freedom to participate in our workforce.”

Creates a back-to-school state sales tax holiday.

Every August, Kansans spend a large amount of money on back-to-school shopping. To ease the pain of the additional but necessary purchases, this bipartisan plan provides tax relief on clothing, school supplies, computer software, and computers and computer supplies. This four-day tax-free holiday will save Kansans nearly $15 million in three years.

“Our students must have the tools necessary to succeed in the classroom and be productive members of society and our workforce,” said Senator John Doll, Kansas Senate District 39. “Creating the sales tax holiday on school supplies and goods ensures Kansas students are prepared for a new school year and all their future may hold.”

“Too many Kansans are feeling the effects of rising costs,” said Representative Henry Helgerson, Kansas House District 83. “It’s crucial that we pass responsible tax cuts to support hardworking Kansans and give them some much-needed relief.”

A copy of the bipartisan plan can be found here.

A copy of Governor Kelly’s remarks can be found here.

Here is the estimated fiscal impact of the proposal.

TOPEKA— Today, Fitch Ratings, a global credit rating agency, released its first credit rating for the State of Kansas. Citing Governor Laura Kelly’s fiscal responsibility, including efforts to pay off debt, balance the budget, and increase Kansas’ Rainy Day Fund, Fitch announced Kansas’ Issuer Default Rating (IDR) as AA with a stable rating outlook.

“It’s clear that our laser-sharp focus on growing the economy, paying off debts, and balancing the budget is setting Kansas up for long-term success,” Governor Laura Kelly said. “Fitch Ratings’ announcement today is great news for Kansans. I will continue to prioritize fiscal responsibility as we work to cut taxes for working Kansans.”

In its report, Fitch cited Kansas’ sustained trend of balanced budgets, bolstering the Rainy Day Fund, and responsible spending as indicators of long-term fiscal responsibility that contributed to the high credit rating. This rating is higher than the most recent credit rating Kansas received, AA-, from S&P Global in February 2023.

“This AA credit rating is affirmation that the path the state has taken to restore stability, predictability, and overall health to the state’s finances is the right path to be on,” said Budget Director and Secretary of Administration Adam Proffitt. “It’s a testament to the work done by Governor Kelly and the Legislature to put the state on solid footing.”

Prior to Governor Kelly’s administration, the State of Kansas’ credit rating and outlook was downgraded four times between 2014 and 2017 by S&P Global. The state’s credit rating was downgraded from AA+ to AA in August 2014, put on a negative credit watch in 2016, downgraded again to an AA- in the same year, and the outlook downgraded from ‘stable’ to ‘negative’ in 2017. S&P Global improved the state’s credit outlook from ‘negative’ to ‘stable’ in 2018 after lawmakers rolled back the Brownback tax experiment.

Fitch Ratings’ report can be found here.

“By taking a middle-of-the-road approach, we have been able to continue putting money back in the pockets of every Kansan,” Governor Laura Kelly said. “This reduction is a step toward eliminating the state sales tax on groceries completely, which will happen in 2025.”

After working tirelessly to put the state on solid financial footing, in 2021 Governor Kelly called on the Kansas Legislature to eliminate the state sales tax on groceries as soon as possible. The legislature ultimately passed legislation that gradually reduced the state sales tax on groceries over three years.

In 2023, the state sales tax rate on groceries went down from 6.5% to 4%, saving consumers $187.7 million per year. By the end of 2024, it is projected that shoppers will have saved more than half a billion dollars in sales tax on groceries over the two years the reduction has been in place.

The state sales tax reduction applies to food, food ingredients, and certain prepared foods. When looking at a receipt, shoppers will see two tax rates, one for qualifying purchases and one for all other items.

The reduction to the 2% state sales tax on qualifying items goes into effect on January 1, 2024.

“This data shows that our efforts to support businesses, create a stable economy, and grow our workforce are paying off,” Governor Laura Kelly said. “Now, Kansas is outstripping the entire nation in economic growth and attracting business investment. Last week, I announced Kansas surpassed $18 billion in business investment since I took office in 2019. It’s clear we have the momentum to continue this trajectory of economic success into 2024 and beyond.”

The Kelly Administration’s work to support the agriculture, forestry, fishing, and hunting industries helped drive this economic growth. While those industries decreased nationally and in 33 other states, they were leading contributors to growth in Kansas.

Kansas also ranked third in the nation for growth in personal income, with personal income growing at 4.9% over the 3rd quarter of 2023. Farming, which decreased nationally and in 41 other states, was the leading contributor to the increased earnings in Kansas.

Kansas’ economic growth is measured by the change in its real gross domestic product (GDP), or the market value of goods and services produced in the state. The second quarter of 2023 included April through June; the third quarter included July through September.

The introduction of this legislation follows the months-long “Healthy Workers, Healthy Economy” tour in which the Governor rallied healthcare workers, farmers and ranchers, business leaders, faith leaders, and rural Kansans across the state in support of Medicaid Expansion. The bill would expand health coverage to working Kansans who currently make too much money to qualify for Medicaid but don’t receive health insurance through work or make too little to afford private health insurance.

“Each year I’ve been in office, I have introduced a bill to expand Medicaid with support from both sides of the aisle. The year, we’re going a step further to meet Republicans in the middle, putting forward a plan that would cut healthcare costs, create jobs, and grow our economy – all at no additional cost for Kansas taxpayers,” Governor Laura Kelly said. “We have taken such a bipartisan approach to incorporate what I’ve been hearing from Kansans during my tour and to reflect conversations we’ve had with Republican lawmakers. Now, there’s no excuse – at this point, every legislator standing in the way of Medicaid expansion is going against a commonsense, fiscally responsible proposal that benefits their constituents.

“As Governor Kelly’s ‘Healthy Workers, Healthy Economy’ tour highlighted, Medicaid expansion is an obvious solution to provide healthcare to hardworking Kansans and to support our hospitals,” said Ed O’Malley, President and CEO of the Kansas Health Foundation. “We appreciate that, by putting forward this measured proposal, Governor Kelly is clearly working to bring Republicans to the table. That’s what’s needed to get Medicaid expanded in Kansas.”

Addressing key Republican concerns, the Cutting Healthcare Costs for All Kansans Act:

Comes at no additional cost to Kansas taxpayers. The federal government pays for 90% of the costs to expand Medicaid, while states pay 10%. Under this proposal, the state’s 10% share is completely covered by drug rebates, a hospital fee, savings from higher reimbursement rates for existing Medicaid recipients, and additional federal funding. This does not include expected additional revenue from Kansas businesses boosted by a healthier workforce or reduced state expenditures on incarceration and state services because of a healthier population.

“My goal is to ensure Kansans’ tax dollars never go to waste, which is why I support this approach to expanding Medicaid,” said Kansas Senator Carolyn McGinn. “Right now, Kansans’ federal tax dollars are going to support hospitals and jobs in states like New York, California and every state adjacent to us instead of being invested in the people of Kansas.”

“It makes no sense to me that, while 40 other states have expanded Medicaid, we have not. Our tax dollars are going to every one of our neighboring states, while healthcare costs rise and hospitals close here in Kansas,” said Kansas Representative Dave Younger. “By including a work requirement and making sure Kansas taxpayers won’t pay for Medicaid expansion, this proposal addresses many of the concerns my Republican colleagues have had. Now, those in leadership positions need to let this topic be debated and voted on.”

Grows the Kansas workforce. This compromise proposal goes a step further than Governor Kelly’s other Medicaid Expansion proposals by including a work requirement for Medicaid enrollees to ensure Kansas’ workforce remains strong. There will be exceptions to this requirement, including for full-time students, full-time caretakers, veterans, and Kansans with medical conditions.

The bill will also reduce uncompensated care costs – the costs healthcare providers take on when uninsured patients can’t afford to pay a medical bill — which will allow providers to compete for healthcare workers in an environment in which all the states surrounding Kansas have now expanded Medicaid.

“This proposal addresses a lot of the concerns I’ve heard from Republican colleagues by including a work requirement and multiple funding streams to ensure Kansas taxpayers won’t foot the bill for Medicaid expansion,” said Kansas Senator John Doll. “I urge my Republican colleagues to join me in supporting this bill to ensure our rural hospitals stay open, to cut healthcare costs and lower taxes, and to get affordable healthcare to more working Kansans.”

Improves public safety. For too long, prisons and jails have been shouldering the burden of providing medical care to uninsured inmates at their own expense. Governor Kelly worked with the law enforcement community to include this provision so that law enforcement can redirect those resources to focus on keeping Kansans safe. This would also reduce pressure on local governments to increase property taxes for correctional healthcare costs.

“This bill provides relief for county jails like the Sedgwick County Jail, which have been burdened with covering the high costs of health care for uninsured inmates,” said Sedgwick County Sheriff Jeffrey Easter. “If this part of the expansion proposal were to pass, it would cut down on expenses for local taxpayers and ease up resources so our law enforcement can focus on public safety.”