On Friday while most news media were watching to see who is filing for whatever state office, the Kansas Department of Revenue released a near-shocking report on receipts into the State General Fund — the checking account for state government.
That little-read document shows last year’s income tax increase is working to put the state back into budget balance. And that builds on the previous year’s sales tax increase that is finally kicking in and making state government more economically stable than Kansans have seen in the past seven years (yes, you can go ahead and call it the Gov. Sam Brownback/now-Gov. Jeff Colyer era).
What was the report? It was May revenues from all sources, and it showed in May, the state received $542.9 million in taxes, $101 million more than predicted, and a dramatic $92.5 million of that unexpected cash was from personal income taxes.
Last year, recall, and who doesn’t, there was that massive income tax increase, retroactive to Jan. 1, 2017, six months before lawmakers overrode Brownback’s veto of the measure designed to raise $1.2 billion over two years.
It was that measure that eliminated the income tax exemption for so-called “non-wage income” (often LLC or self-employment income) that some 330,000 Kansans had enjoyed for four years.
Well, there’s one month — June — remaining in this fiscal year, and the income tax increase appears in the first 11 months of its life to have raised individual income tax receipts by about $1.077 billion. That’s not the $1.2 billion estimate, but there’s a month left, and, well, the tax law has been in effect long enough for some to have probably found a kink or two in it that can be exploited to save a few bucks.
So, what’s the good news …that the tax increase has apparently worked in boosting state revenues?
It’s early yet, but it appears that the state may, probably not in the upcoming fiscal year but at least the year starting July 1, 2019, have enough money to finance a new highway plan, and, probably under court order, increase the funding for public schools.
That revenue report — strange what sorts of behavior you can track when different taxes are split out by specific levy — also shows, for example, that Kansans probably spent a fair amount of time on the porch smoking. Yep, in May, Kansans paid $11.9 million in taxes ($1.29 a pack) on cigarettes, about $2 million or 19 percent more than predicted. Now that’s more money for the state, but you gotta figure that long-term, Kansans would be better off if they hadn’t smoked more than predicted in May. Best nuance from the Revenue Department’s report on cigarettes probably was that Kansans smoked less this May than they did last May ...
Another of those nuances from the report was Kansans increasingly like to buy stuff over the Internet or in other states to bring home. While sales tax revenues in May were a sizable $189 million, about what was expected, Kansans spent more on “compensating use” taxes. Those are essentially sales taxes paid on purchases out of state, or over the Internet, where just a portion of those purchases by Kansans carried the state’s sales tax. The news there? While it’s nice that some of those out-of-state and Internet taxes were collected (about $32.3 million in May and $372 million since last July), it’s still revenue that didn’t go through Kansas merchants’ cash registers, which keeps stores open and increases retail sales jobs.
So, Kansas is apparently moving back toward a budget that won’t call for year-after-year cuts in spending. Or … lawmakers might start the tax-cut era again.
Martin Hawver is publisher
of Hawver’s Capitol Report.