Topeka — A senior policy analyst in New York says state officials misrepresented her research into unexpected drops in tax revenues in April and May so they could blame the federal government for poor performance and dismiss it as a fluke.
State tax revenues fell $217 million short of projections in May after coming up $92 million short in April, putting state revenue for the fiscal year roughly $310 million below estimates with only one month left, The Wichita Eagle reported.
Gov. Sam Brownback and officials with the Department of Revenue say the shortfalls were caused by federal tax changes and should not continue in the next fiscal year.
Others, including several economists and lawmakers, are afraid the shortfalls will be around awhile.
Lucy Dadayan, a policy analyst with the Rockefeller Institute of Government, told The Eagle the revenue department misrepresented her research about state tax revenue, and that Kansas could be forced to make cuts in the near future.
When they announced the May shortfall, revenue department officials pointed to an April report Dadayan co-authored that said states across the country are having trouble forecasting revenues because of uncertainties with the capital gains tax created by the fiscal cliff.
High-income earners across the country sold stock at the end of 2012 in anticipation of the federal tax on capital gains increasing because of the fiscal cliff. While that boosted income for that tax year and resulted in windfalls for states, many of them now are seeing 2014 revenues falling after the previous year’s inflation.
“Kansas has been affected by this one-time 2013 tax year event. This is evidenced by a 47 percent drop in April and May payments attributed primarily to capital gains,” the Department of Revenue said in its release.
But Dadayan’s report goes far beyond that in casting blame for the plight of Kansas, one of six states to experience a double-digit percentage decline in personal income tax revenue.
“The large declines in Delaware, Kansas, and North Dakota are mostly attributable to the legislative changes that cut income tax rates as well as restructured tax brackets,” the report states.
Dadayan said the capital gains phenomenon had a bigger impact in states like California and New York that rely more on nonwage income.
“Of course the fiscal cliff had an impact in almost every state that has income tax,” she said. “But Kansas is a special case because they had the largest tax cut in their history . and the large tax cuts in income tax is the primary cause of the declining revenues.”
Revenue Secretary Nick Jordan said the department quoted the report “to show that other states were experiencing the same thing.”
“That’s the quote we used, and that’s why we did it,” he said.
Brownback disputed the notion that Kansas’ shortfalls were self-inflicted and insisted they were the product of an ailing national economy.
“We’ll finish this year with several hundred millions of dollars cash on hand . so we’re going to be in fine shape,” he said. “We projected a dip.
We’ve had good overall performance of our agencies being able to hold back costs, so it’s two sides of the equation.”