Gov. Laura Kelly signs tax reduction bill passed with bipartisan majorities in special session

Republican Senate President Ty Masterson and Democratic Gov. Laura Kelly praised a new Kansas law requiring special education services for children with dyslexia. That statute also replaced the toxic label of "emotional disturbance" with a more generic label of "emotional disability." (Sherman Smith/Kansas Reflector)

TOPEKA — Gov. Laura Kelly said Friday she signed a bill reducing state taxes by $1.2 billion over three years that was approved with broad bipartisan support of legislators during a one-day special session.

The Democratic governor put pen to paper to make law of Senate Bill 1, a tax-reduction plan negotiated by Kelly and Republican Senate President Ty Masterson and GOP House Speaker Dan Hawkins. It won approval during Tuesday’s special session on votes of 121-2 in the House and 34-4 in the Senate.

“I am proud to be delivering on my commitment to responsible, meaningful tax relief for all Kansans,” Kelly said.

Kelly said in a statement the legislation reduced tax obligations of Kansans without threatening the state’s financial health. Overall, the bill would cost the state treasury an estimated $1.2 billion over three years or about $2 billion over five years.

The new law emphasized income tax changes by establishing a two-bracket system starting in tax year 2024. For married individuals filing jointly, taxable income from $0 to $46,000 would be taxed at 5.2%, while taxable income above $46,001 would be taxed at 5.58%. The existing three-bracket system had income tax rates of 3.1%, 5.2% and 5.7% depending on income levels.

Under the bill, the personal exemption from state income taxes presently at $2,250 for individuals would be elevated to $9,160, and there would be an additional $2,320 tax break for each dependent listed on the tax return. The standard deduction would grow from $3,500 to $3,605 for single filers and from $8,000 to $8,240 for married filers. In the 2024 tax year, the head of household deduction would expand from $6,000 to $6,180.

It eliminated in tax year 2024 a state tax on Social Security benefits that netted the state more than $100 million annually. More than 30 states don’t tax Social Security.

In addition, the legislation included a $6 million per year child and dependent care tax credit that was incorporated in the bill at Kelly’s request during closed-door negotiations.

The package would increase in the 2024 tax year the amount of residential property exempted from the statewide school finance levy to $75,000 of appraised value. Currently, the exemption from the 20-mill state level for K-12 schools stands at $42,000.

The legislation signed by Kelly dropped a plan to repeal on July 1 the state’s 2% state sales tax on groceries. That state’s sales tax on food will come to an end Jan. 1 under existing law.

The package deleted property tax reductions contained in previous bills vetoed by the governor, which led to calls by Republicans and Democrats to return to the Capitol in 2025 and move quickly on property tax relief.

Hawkins and Masterson, who are heading into a campaign season in which Democrats hope to crack the GOP’s two-thirds majorities in the House and Senate, said in a joint statement tax relief was “now officially on its way to every Kansan.”

“While we firmly believe more relief could have and should have been included in this bill, it is an important first step toward putting Kansas in the best position for economic growth,” the GOP lawmakers said. “When we return in January, we plan to  build on this momentum with a focus on providing property tax relief for every Kansan.” 

The bill negotiated by Kelly, Masterson and Hawkins reduced by about $50 million tax relief contained in Senate Bill 37, which was the last major tax bill vetoed by Kelly prior to calling the special session.

(An earlier version of this story incorrectly listed the upper individual income tax rate. The new rate will be 5.58%, a reduction from 5.7%.)

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