Kansas has $8M surplus in tax collections in November after estimates were revised downward
TOPEKA ? Tax revenues flowing into the state of Kansas in November exceeded estimates for the first time this fiscal year, producing $7.8 million more than budget officials had expected.
Those estimates were just revised downward last month in the wake of sluggish growth in employment and retail sales, as well as weakness in the farm and oil industries. But the numbers released Tuesday gave administration officials cause to celebrate — and to defend Brownback’s controversial tax policies.
“I think the encouraging part is that individual income tax continues to grow, which is driven by withholding because of that low 4.1 percent unemployment rate,” Revenue Secretary Nick Jordan said.
According to Revenue Department figures, the state collected $183.6 million in individual income taxes in November, about $3 million more than the newly revised estimates. That was also $6.4 million, or 3.4 percent, more than the state collected in November 2014.
Retail sales taxes also showed significant growth, at $187.8 million in November, nearly 2 percent above the estimate, and 10.4 percent more than November of last year. Much of that, however, is due to an increase in the sales tax rate that lawmakers approved earlier this year when they raised the state’s rate to 6.5 percent.
Those numbers reflect sales taxes that consumers paid in October and that retailers remitted to the state in November. They do not include sales taxes from the Nov. 27 “Black Friday” holiday shopping spree.
“After Governor Brownback and Republican legislators passed the largest tax increase in Kansas history last spring and with revenue projections lowered just last month, it makes sense that state revenue receipts would be higher than estimated,” said House Minority Leader Tom Burroughs, D-Kansas City.
So far, for the fiscal year that began July 1, the state has collected nearly $2.25 billion in taxes, or about one-third of a percent above the newly revised estimates and 3.1 percent more than the state had collected by this time last year.
In addition to tax revenues, the Revenue Department also reported “all revenue” figures, which include nontax money streams such as interest on deposits, fund transfers and agency earnings.
With those included, total revenue collections in November were $14.6 million more than the estimates.
The revenue numbers were released as Brownback was meeting with his Council of Economic Advisors, where agency officials credited the administration’s tax policies with spurring job growth in the state.
In 2012 and 2013, at Brownback’s urging, Kansas lawmakers passed a series of massive income tax cuts, including deep cuts in tax rates and a total exemption for certain kinds of nonwage business income that exempted more than 330,000 business owners from paying any income tax.
In tax year 2013, Jordan said, the Department of Revenue counted 8,666 new small-business tax filers — that is, names, Social Security numbers and business entities that had never been listed on Kansas tax returns in the past. Those filers, Jordan said, produced $486.7 million in new income in Kansas.
But critics of Brownback’s tax policies have challenged those figures, noting that there are no similar statistics for prior years, so it’s impossible to tell whether the 2013 numbers are above or below normal for any given year.
Brownback, however, said he is not backing down from his hopes to eventually eliminate all income taxes in Kansas.
“I want to get everybody to zero,” Brownback said. “This is the way to create more job growth. When you create more job growth, you get wage upward pressure and you get more people being able to work and make more money. This is very good.”
But employment numbers released by the Department of Revenue last month showed that overall, employment has grown only 1.2 percent in Kansas during the last 12 months, ranking Kansas 41st among the 50 states in job growth.
Labor Department officials, however, told the Council of Economic Advisors that the biggest challenge in Kansas is not the lack of jobs but rather a shrinking labor force, which had 10,000 fewer workers in October than it did a year earlier.
Meanwhile, Revenue Department officials said the next major challenge to state revenues is the burgeoning online retail industry, which allows many shoppers to escape paying sales taxes on many of their purchases.
Kansas currently belongs to a multistate compact in which member states and many online businesses have agreed to collect and remit sales taxes to the customers’ home states. But Jordan noted that many states, and many online businesses, are not part of that compact.
Brownback said he will urge the Kansas congressional delegation to support a uniform, nationwide sales tax law that would require all states and all online businesses to collect and remit sales taxes.