Tax shortfall makes budget hole deeper

Kansans have learned to keep expectations low about the state’s fiscal condition, which made March’s $1.7 million miss of revenue estimates almost something to celebrate.

But it was still the 12th time in 13 months that collections have come up short. And March does nothing to shrink the budget hole that lawmakers and Gov. Sam Brownback will face April 27, when they’ll also have new official revenue estimates and perhaps another Kansas Supreme Court ruling to consider as they try to wrap up the session’s work.

Up 3 percent from estimates, the March sales tax receipts were a relief after months of disappointing collections, but individual income taxes were 9 percent and $14 million short of projections – another indicator of the state’s fiscal disorder.

There is a growing realization that something must be done, other than giving the administration freer rein to borrow or to draw down funds meant for highways and children’s programs.

Many tax filers have been disappointed to learn that the 2015 Legislature not only hiked the statewide sales tax rate and cigarette tax but also eliminated most state income tax deductions, including for medical expenses, and halved the property tax and mortgage interest deductions.

That was an effective increase in income taxes for them, accompanied by a pause in Brownback’s promised “march to zero” state income taxes for all.

Meanwhile, of course, the full exemption on state income taxes on the pass-through income of 330,000 business owners and farmers continues. The governor has threatened to veto any rollback of that perk. But that deterrent may not last, and shouldn’t.

A recent House hearing featured testimony from a number of business owners favoring a do-over on the pass-through exemption.

A Wichita Independent Business Association survey of members found nearly 80 percent support for changing the law, even though 45 percent of the 52 respondents benefit from it, according to the Wichita Business Journal.

When the beneficiaries of a tax break are calling for its reform or repeal, state leaders ought to listen.

The case for standing by the exemption weakens further with every report about Kansas’ economy, which has yet to show evidence of the “shot of adrenaline” Brownback said his tax cuts would deliver.

Kansas’ income growth was just 2.5 percent last year, the seventh worst rate in the nation. Kansas also lost 5,400 seasonally adjusted nonfarm jobs between February 2015 and February 2016 – far from the gain of 25,000 a year Brownback set as a goal during his re-election campaign.

Brownback and his fiscal team may have faith that their tax policy will prevail – eventually. But at what cost? More and more Kansans recognize both the reality and elected officials’ responsibility to react to it with more than fund raids, service cuts and deeper debt.

This story was originally published April 2, 2016 at 7:06 PM with the headline "Tax shortfall makes budget hole deeper."