I would like to provide some analysis of claims made in the Editorial titled “Taxing issue: Kansas shows astounding decline in revenue.”
First, the following information was used from the Rockefeller Institute: “The Nelson A. Rockefeller Institute, which does nonpartisan public policy research for the State University of New York, reported that Kansas had the largest percentage of personal income tax collection decrease in April, May and June 2014 compared to the second quarter of 2013, and the largest in the nation. Kansas had a 42.9 percent decrease in revenue. The Institute reported that the state with the closest percentage of revenue decline was North Dakota, at 32.8 percent. The U.S. had an overall average decline of 7.1 percent.”
Kansas had the largest decline in personal income tax collections because we cut income taxes the most.
The revenue decline was projected and built into the budget. It is not an appropriate comparison to compare our revenue decline to other states for that reason. It is fair to compare the decrease in revenue to what our estimates were based on in the budget. When the revenue decline is isolated to estimates versus actuals, then we are similar to other States because of the fiscal cliff effect at the federal level. Why did Kansas and other states see a decrease of revenue from the official estimates? People that pay income taxes through estimated payments are doing so based on 2013 income that is deflated due to the effect where investments and capital gains were taken out prior to Jan. 2013 as the federal tax cuts went away. This will be the last month where we will have that estimated payment effect.
All in all, we are 1.7% below revenue projections year-to-date. The sky is not falling.
The second claim made in the editorial was about the effects of the tax cut. “The results have been devastating, and the “trickle-down” is not trickling down. No business owner is going to hire employees they don’t need, and at the very least, these income tax cuts should have been tied to hiring employees. There may have been an increase of business filings with the state, but it was mostly a race to change the type of business to a pass through to limit taxes.”
This is an incorrect statement. Let’s look at what has happened. The tax cuts were intended to help small businesses grow.
Small business income is up 26%, which is higher than our surrounding states and one of the best rates in the country.
What do small businesses do with their additional income? They hire more workers and they pay higher wages. Kansas is second in the country in job gains from new and expanding businesses since the tax cut went into effect. Wages for Kansas workers for July and August compared the year prior outpace our neighbors.
A growing economy due to small business growth along with good stewardship of taxpayer money will place the Kansas budget in a strong position.
State budget director