While it is good to see Kansas tax collections exceed expectations for the third straight month, that news does not mean legislators should stop their efforts to revise state tax policies.
On Wednesday, the Department of Revenue reported tax collections in February came in $36.9 million above official estimates. It was the third straight month that tax revenues have met or exceeded the state’s revised projections. Projections were revised downward in November after several months of shortfalls.
Since the revisions, revenues for the fiscal year have exceeded the new, lower estimates by about $68.5 million. Kansas Revenue Secretary Sam Williams said the latest report indicates the Kansas economy is improving.
“I am pleased to see continuing growth in withholdings and individual income taxes this month,” he said. “Month-to-month sales tax have increased 2.4 percent and is a hopeful sign that Kansans’ income growth means they have more money to spend.”
But even with the recent improvements, Kansas still faces a $281 million shortfall this fiscal year and another shortfall of approximately $500 million for the 2018 fiscal year, which runs from July 1, 2017, through June 30, 2018. It would be a mistake to assume that just because revenues have exceeded lowered expectations for a couple of months that the state’s budget is out of the woods.
Lawmakers came tantalizingly close last week to rewriting the state’s tax policies, passing a bill that would have raised roughly $1 billion over the next two years by repealing the so-called LLC exemption that allows more than 330,000 farmers and business owners to pay no state income taxes on their nonwage business income. It also would have raised individual tax rates on most Kansans and would have reinstated a third, higher tax bracket on individuals with more than $50,000, or couples filing jointly with more than $100,000 a year in taxable income.
Gov. Sam Brownback vetoed that bill. The House voted to override Brownback’s veto, but the Senate fell a handful of votes short of an override. During debate on the override bill, opponents of the override said there remained other bills waiting in the wings to address the state’s tax issues.
The responsibility to bring those bills forward hasn’t changed, said Senate Democratic Leader Anthony Hensley, of Topeka.
“Without comprehensive income tax reform, the Legislature will have failed to balance the budget and end the irresponsible practice of using one-time money to pay our bills,” Hensley said. “February’s revenue numbers don’t change this reality. It’s time to do what’s right for the future of Kansas.”
Hensley is right. Lawmakers should follow through on their pledge to offer a revised tax bill that addresses the LLC exemption, implements a revised income tax structure that is fair and reasonable for all Kansans and provides a revenue stream that allows the state to maintain state services at a level that is acceptable to the state’s residents.