By JOHN HANNA
TOPEKA, Kan. (AP) — Democratic Gov. Laura Kelly on Tuesday denounced a Republican plan for cutting Kansas income taxes as “unthinkable” during the COVID-19 pandemic and proposed an alternative that would pay for its relief by taxing online music, movies and streaming services.
Kelly outlined her proposal just hours before the Kansas Senate was set to debate the GOP’s measure, which is aimed at providing $423 million in relief over three years to businesses and individuals paying more to the state since an overhaul of federal tax laws in 2017. The Senate’s top Democrat, Minority Leader Dinah Sykes, said she would offer Kelly’s proposal as an amendment to the Republican bill.
The governor’s proposal appeared unlikely to pass in its entirety with Republicans in control of the Legislature, because many of them oppose the provision to impose the state’s 6.5% sales tax on digital products, such as online music and streaming services. Kelly’s plan is designed to avoid costing the state any net revenues and to provide its relief to a broader group of individual taxpayers — and no relief for businesses.
Top Republicans contend they’re trying to help the people and businesses whose higher state tax bills have generated unexpected revenues for the state, comparing the windfall to finding someone’s lost wallet full of cash on a sidewalk. But Kelly vetoed two similar GOP bills in 2019, arguing that they would undermine funding for public schools and critical state services.
“It would be bad enough to introduce this bill in a normal year, but this year makes it particularly irresponsible,” Kelly said of the GOP plan during a Statehouse news conference. “It is unthinkable that legislative leadership, during a health and economic crisis the likes of which we haven’t seen for 100 years, when we are trying to steer Kansas toward recovery from the pandemic, that they would even consider such action.”
Kelly’s comments signaled that she is likely to veto the GOP tax plan if lawmakers passed it, though she stopped short of a public promise. Republican leaders didn’t have the two-thirds majorities necessary in 2019 to override Kelly’s vetoes, but elections last year made the GOP supermajorities in both chambers more conservative.
Senate approval of the GOP plan would send it to the House, where a committee already has been reviewing tax issues. Republican leaders have made cutting income taxes a top priority.
“We need a balancing act,” said Senate tax committee Chair Caryn Tyson, a Parker Republican. “We need a level playing field, and that is what I am trying to do.”
The federal tax changes in 2017 were championed by former President Donald Trump and discouraged people from claiming itemized deductions on their federal returns. Kansas law does not allow people to itemize on their state returns if they don’t on their federal returns, resulting in larger state tax bills for some.
The GOP plan would allow individuals to itemize on their state returns even if they didn’t on their federal returns and allow them to do so even for last year. That’s the majority of the relief provided by the bill over three years, but about 45% of the savings for taxpayers would go to businesses.
Kelly’s plan is focused solely on individuals and would increase the state’s standard income tax deductions for individuals by 35% over two years. She and fellow Democrats argued Tuesday said the governor’s plan would not only provide relief to more people but help low-income and working-class families more than the GOP plan.
That part of Kelly’s plan could appeal to some Republicans — as something to add to the GOP plan. Senate President Ty Masterson, an Andover Republican, said increasing the standard deduction “does help people.”
But Republicans have derided the idea of imposing the sales tax on online music, movies and streaming services as a “Netflix” or “Baby Yoda” tax that will hit families stuck at home because of the pandemic. Kelly’s plan also would require websites like Amazon, eBay and Etsy to collect the state’s tax when they sell other businesses’ goods to Kansas residents.
Kelly and other Democrats argued that those provisions merely modernize the state’s tax laws, but the changes would raise about $101 million a year.
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TOPEKA – Governor Laura Kelly held a press conference Tuesday to discuss Senate Bill 22 that she says would blow a $423M hole in the state budget. "The bill also targets tax cuts for only the top 6 per cent of Kansas tax payers," she said. "We've seen what happens in Kansas when reckless tax cut bills are passed. Our schools, roads, pension system and other essential services take the hit."
Senate Minority Leader Dinah Sykes and House Minority Leader Tom Sawyer joined the governor for the press conference to announce they have crafted a proposed tax bill that would generate $97 million in additional revenue for Kansas, support small businesses, and give 94% of Kansans a tax cut – all with a neutral, balanced state budget.
“COVID-19 has brought unprecedented challenges for hard-working Kansans, their families, and their businesses,” Governor Laura Kelly said. “We know they need relief - and they need it as soon as possible. 
Our proposal is an amendment to Senate Bill 22, that will provide tax relief to the vast majority of Kansas families and assist in our state's economic recovery from the COVID-19 pandemic.”
All remote sellers - whether selling through a marketplace platform like Amazon or Etsy, or on their own - have been instructed to register and collect tax on property that is shipped into Kansas. But under current tax code, out-of-state retailers are able to dodge the use tax on sales to Kansas customers.
With today’s proposed plan, the marketplace facilitator would be responsible for collecting and remitting the tax on behalf of the remote sellers on their platform. This would allow the state to collect from fewer entities and increase compliance. Kansas is one of three states that has not enacted a marketplace facilitator provision.
The new plan also imposes taxes on digital products, like video streaming services.
“When out-of-state retailers can duck taxes, there is no way for the local clothing store up the street or the local book store to try and compete with out of state prices,” Governor Kelly said. “By requiring marketplace facilitators to collect use tax on out-of-state products, we level the playing field for Kansas main street businesses.”
Together, these marketplace facilitator and digital goods provisions would generate approximately $97 million in additional revenue for the state. That revenue would then be used to increase Kansas's standard tax deduction by 20% in tax year 2021 and 35% in tax year 2022. 
If the revenue neutral proposal were implemented, 94% of Kansans will see a tax cut.
The plan is proposed as an alternative to Senate Bill 22, which will be heard by the Kansas Senate Tuesday.
“At a time when we’re facing huge unemployment rates and an unsteady economy, we do not need tax cuts for the rich which have no impact on unemployment,” Senate Democratic Leader Dinah Sykes said. “At a time when we’re facing economic uncertainty, we do not need to repeat failed tax experiments which studies have shown – and which we have seen firsthand here in Kansas – have no impact on economic growth. Senate Democrats are proposing solutions that will grow our economy, keep Kansas businesses competitive, and keep more money in the pockets of Kansas families.”
“During a time of economic uncertainty and in the midst of a pandemic, Republicans are pushing to spend over $600 million in tax cuts for giant multi-national corporations,” House Democratic Leader Tom Sawyer said. “The vast majority of Kansans would receive no tax relief. We will always continue to fight for tax cuts that help working Kansans lessen their financial burden.”