Gov. Kelly raises red flag after January tax revenue short of projection for 3rd straight month
photo by: John Hanna/AP File
TOPEKA — The Kansas Department of Revenue reported state government tax receipts in December were 6.5% below projections amid unexpected softness in state sales tax receipts and individual and corporate income tax payments.
The report outlining how total revenue fell $64 million below the estimate made by state economists came as the 2024 Legislature and Gov. Laura Kelly battled over the size and structure of massive tax reduction bills. Kelly proposed a plan slashing state tax receipts by $1.1 billion over three years, while Republicans in the House and Senate are proposing a $1.6 billion tax bill despite a veto by the Democratic governor.
“Coming short of the estimates for the third month in a row emphasizes that tax cuts must be done in a fiscally responsible way,” Kelly said Thursday. “The bipartisan tax package that I’ve proposed to the Legislature provides substantive and direct tax relief to all Kansans without putting at risk our overall economy.”
Several elements of the rival tax bills were identical, including discontinuation of the state’s sales tax on groceries in April rather than Jan. 1, 2025, and the end to state income taxation of Social Security benefits.
A distinction was that the House and Senate bill included a flat-rate personal income tax of 5.25%, which Kelly said would primarily benefit wealthier Kansans. The single-rate system would replace Kansas’ three-tier approach that raised the rate in conjunction with income growth.
Senate and House GOP leadership could attempt veto overrides next week in the Capitol, with the process starting in the House before moving to the Senate. Two-thirds majorities are needed in both chambers to override the veto, and that would likely be easier to achieve in the House than in the Senate.
“A lower, flat income tax rate would remove barriers to upward mobility in Kansas and provide greater tax savings to Kansans over the course of their working lives,” said House Speaker Dan Hawkins, a Republican from Wichita.
The state Department of Revenue said total tax collections in January hit $928 million. That was $64 million less than the state’s consensus revenue estimate made in November. Compared to January 2023, Kansas tax receipts last month were off 11.3% year-to-year.
The biggest hit was in corporate income tax collections as receipts were $25 million less than anticipated. The total of $89 million was 21.9% below the monthly estimate and 45.9% below collections last January. Personal income tax revenue for January came in at $475 million. The total was $19 million below projections for the month and 3.9% less than the amount received in January 2023.
Combined retail sales tax receipts to the state were $344 million, which was $18 million or 5.1% below the estimate and down 4.7% from January 2023.
— Tim Carpenter reports for Kansas Reflector.