Kansas Sets the Stage for Smarter Tax Reform with SB 269

Originally posted at Kansas Policy Institute. 

Kansas took a major step toward lasting, sustainable tax reform with the passage of Senate Bill 269—a forward-thinking bill that rewards responsible budgeting with gradual income tax reductions. Predictably, Gov. Kelly vetoed the bill before being overridden by the House and Senate during their annual Veto Session. This all veto-override back-and-forth seems somewhat predictable as the measure initially passed both chambers with veto-proof majorities. Now that Gov. Kelly was rightly corrected in her veto, Kansans should understand how this policy, if executed properly, could reshape the state’s tax code and fiscal future for the better.

Unlike previous attempts at tax reform that lacked spending control, SB 269 is grounded in fiscal discipline. The bill creates a mechanism for lowering individual and corporate income tax rates over time—but only if two key conditions are met:
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1. State revenues must exceed inflation-adjusted 2024 revenue levels.
2. The state’s Budget Stabilization Fund must hold at least 15% of general fund revenues.
   
   

If those conditions are satisfied, tax rates would step down automatically each year as state revenues increase—eventually flattening the personal income tax to 4%, reducing corporate rates, and cutting bank tax rates to as low as 2.6%. It’s an innovative design that avoids past mistakes and ties tax relief to economic performance and spending restraint.

Americans for Prosperity-Kansas rightly praised the Legislature for prioritizing sustainable relief. State Director Elizabeth Patton said, “SB 269 makes our state more competitive, paving the path for a strong economic future.”

She’s right—and there are data to back it up.

According to our research at Kansas Policy Institute, Kansas’ general fund spending has grown by more than $2.5 billion since 2020—well above the rate of population growth plus inflation. This excessive growth has not translated into better outcomes. For example, student achievement remains stagnant, with roughly half of Kansas students below grade level in reading and math despite record-high K-12 spending.

SB 269 responds to that by incentivizing lawmakers to live within their means. If spending stays under control, taxpayers benefit. If not, rate reductions pause. I’ve long advocated for this kind of sustainable budgeting approach through the Sustainable Budget Project: tie spending to the maximum rate of population growth plus inflation and use surpluses to cut taxes—not grow government. If the general idea sounds familiar in The Sunflower State, check out our annual Responsible Kansas Budget. 

Critics argue that SB 269 doesn’t provide immediate relief. And it’s true—taxpayers won’t feel the impact this year. But that misses the bigger picture. This bill lays the foundation for real reform that can endure—not just through one legislative session, but for generations.

As Sen. Caryn Tyson put it, “We’re going to reign that growth in by creating a step-down.” And that’s exactly what Kansas needs: to shift from reactive policymaking to a proactive, principled approach.

Meanwhile, state budget forecasts are strong. General fund tax collections were more than $1 billion higher in FY 2023 than in FY 2020. Rather than hoard that surplus or expand programs that aren’t delivering results, SB 269 directs future excess revenue to flatten the tax code, giving back to the families and businesses that earned it in the first place.

And the structure isn’t just good policy—it’s good economics. Lowering marginal tax rates makes Kansas more competitive for investment, talent, and job creation. That means more opportunity for all Kansans—not just those lucky enough to navigate today’s complex tax system.

Governor Kelly made her choice: She blocked the path to a stronger, more competitive Kansas. Kansans deserve better than bloated budgets and overpromised programs. They deserve a tax code that grows with them—not against them. SB 269 is a smart step forward. Thankfully, the Kansas legislature limited the future excessive taxation of taking more of what citizens earn by overriding Gov. Kelly’s veto.