There certainly are two ways to look at last week’s report that state tax collections for October were 3.8 percent below projections and 6.7 percent below collections for October 2012.
Kansas Secretary of Revenue Nick Jordan sees that as a positive trend because it means Kansans are paying fewer taxes. “Kansas families and businesses have been given real tax relief for the first time in decades,” he said. “And lower income tax rates are allowing people across Kansas to spend more of their hard-earned dollars as they see fit in the private sector rather than sending them to Topeka.”
That does, indeed, sound like good news, but the other side of the story is that the current state budget is based on those revenue estimates that aren’t being met by tax collections. Tax revenues for October were $18 million below the projections. Where will the money come from to make up that shortfall? Will the state have to push more tax obligations onto local property taxes or will it decide to cut spending on highways, schools or other state responsibilities?
Lower income taxes are a cornerstone of the state’s current financial strategy. Individual income tax collections for last month were 17.4 percent below collections for October 2012. For the current fiscal year, which began July 1, individual income tax collections are down 18.7 percent. The hope, as acknowledged by Jordan, was that Kansas businesses and individuals who benefitted from lower income taxes would plow that money back into the state economy, bolstering business and creating new jobs.
Some new jobs may have been created, but the state’s unemployment rate — while still below the national rate — actually is heading in the wrong direction. It was higher in August (5.9 percent) than it was in January (5.5 percent).
Like many issues, lower state taxes are a double-edged sword. Kansans may enjoy paying less in taxes now, but they may not be so pleased down the road by the consequences of state revenue declines.