Income and sales tax revenue received by the state of Kansas during the fiscal year ending in June topped by $440 million total collections in the previous fiscal year, officials said Tuesday.
The Kansas Department of Revenue closed the accounting ledger with $7.5 billion in total tax collections from July 2018 to June 2019, which was $190 million or 2.6 percent higher than anticipated by analysts.
The treasury report served as evidence to a House Democratic leader the state could make long-sought investments in government programs and build the reserve fund, but the report demonstrated for a Senate Republican leader that the governor missed a golden opportunity to reduce taxes.
House Minority Leader Tom Sawyer, D-Wichita, said the state had an opportunity to make overdue investments for repair and upgrade of highways, improvements in care of foster children and to deal with staffing and overcrowding problems in prisons. The state also can move ahead with expansion of eligibility for Medicaid to 130,000 low-income Kansans, he said.
"We definitely need to be careful," Sawyer said. "We need to build up the rainy day fund as much as possible."
Jim Denning, the Republican majority leader in the Senate, said the revenue report showed Kansas would have been able to afford income tax reduction bills vetoed in March and May by Democratic Gov. Laura Kelly. He was especially irritated Kelly nixed legislation that would allow Kansans to take advantage of tax reform signed by President Donald Trump.
Both bills would have allowed Kansans to take an enlarged standard deduction on federal returns while claiming itemized deductions on state taxes. Without decoupling the state and federal tax system, he said, Kansans were denied tax relief.
"She passed a $120 million stealth tax increase," said Denning, a Republican from Overland Park.
Kelly said that Denning sought to take the state back to days of former Govs. Sam Brownback and Jeff Colyer, who initiated and perpetuated a 2012 income tax "experiment that decimated our state" until much of the program was repealed in 2017.
"We cannot afford to repeat that mistake," Kelly said. "While the higher-than-estimated tax revenue numbers are a good sign, we still have a lot of work to do in repairing damage caused by the previous administrations. And, with economic uncertainty on a national scale, we have to be cautious."
The first bill vetoed by Kelly would have deflated state tax revenue by $500 million over three years. Half of the total would have benefited businesses, especially multinational corporations seeking to avoid state income tax when bringing profits earned overseas into Kansas. It also would have lowered the state's 6.5 percent sales tax on groceries to 5.5 percent.
Kelly vetoed an alternative that would have cut individual and state tax obligations in three years by $245 million. It would have bought down the grocery sales tax with a higher internet sales tax.
Mark Burghart, secretary of the Kansas Department of Revenue, said the tax bulge during the 2019 fiscal year was attributable to expansion in individual income tax receipts. Yearly sales tax revenue declined by 0.27 percent, he said.
Based on the multiyear budgetd approved by the Legislature and Kelly, state spending is projected to outpace revenue under the plan covering the new fiscal year that began July 1. Projections from the Legislature’s nonpartisan research staff showed the same could be true in subsequent years, making revenue shortfalls inevitable unless lawmakers raised taxes or pulled back on spending.