Federal tax changes boost Kansas revenues in December
Topeka ? The state of Kansas collected $75 million more than expected in December as many people tried to prepay their 2018 income taxes before the new federal tax law went into effect Monday, capping the amount of state and local taxes people can deduct from their income.
The Kansas Department of Revenue reported that the state took in more than $335 million in individual income taxes in December, which was $80 million more than forecast. But that $80 million overage was offset by about $5 million in shortfalls in corporate income and retail sales tax collections during the month.
“This is simply a shift in the timing of tax payments,” Revenue Secretary Sam Williams said in a news release. “We truly will not know the effect of state and federal tax policy until after the filing deadline in April.”
Prior to Jan. 1, people who itemized deductions on their federal form could deduct from their taxable income the full amount of state and local income and property taxes they paid during the year.
But under the new federal tax law that President Donald Trump signed into law Dec. 22, starting in tax year 2018, that deduction is capped at $10,000. As a result, many people tried to prepay the balances they expect to owe on their 2017 state and local taxes in order to get the full deduction.
Douglas County Treasurer Paula Gilchrist said she saw a similar spike in property tax collections in December, as many property owners paid both their first- and second-half property taxes before the end of the year.
“We saw a direct correlation between activity and questions from callers (after the signing of the bill). It was a pretty short window,” Gilchrist said in a phone interview Tuesday. “There wasn’t much time between passage of the bill and the end of the year for payments to be made. It was pretty hectic.”
So far this fiscal year, which began July 1, the state of Kansas has collected just over $3.1 billion in taxes. That’s $83.6 million, or about 2.7 percent, more than budget officials predicted when they revised their revenue estimates in November. Those estimates, however, were made well before Congress passed the recent federal tax changes.
Individual income taxes now make up the largest share of unanticipated revenue, although officials expect that to even out as the year goes along because fewer people will owe taxes when they file their 2017 tax returns in April.
The Kansas Legislature also enacted major changes in 2017 to the state income tax code, reversing course on many of the tax cuts that Gov. Sam Brownback championed in 2012.
Revenue officials have said it may take several more months of data to determine how much of the state’s increased revenue is due to that change, changes in federal tax law and growth in the Kansas economy.
And although retail sales taxes missed the mark in December, they are still more than $900,000 higher than the estimates for the first half of the fiscal year.