Government & Politics

Kansas tax cuts affected revenue shortfall, memo says

Kansas officials underestimated the full impact of income tax cuts, according to the state’s research department, which released a memo Tuesday saying that the cuts contributed to the state’s revenue shortfall of $310 million.

Gov. Sam Brownback and the Kansas Department of Revenue have repeatedly blamed the missed revenue estimates primarily on a federal capital gains phenomenon.

Last year, the state surpassed revenue estimates by more than $69 million, partly because investors sold stock at a higher rate at the end of 2012, expecting that the federal capital gains tax would increase the next year.

Inflated revenue for the last tax year resulted in a dropoff nationwide this year, according to the nonpartisan Kansas Legislative Research Department.

But the state’s new tax laws have also have contributed, Legislative Research says.

“It appears that some of the fiscal notes associated with various income tax law changes enacted in 2012 and 2013 were understated,” the memo states.

Legislative Research could not specify what percentage of the shortfall was caused by income tax cuts. It said more study would be needed.

The Kansas Department of Revenue stood by its earlier statements, which placed the blame squarely on the capital gains phenomenon.

“Our analysis shows it was the primary cause,” Jeannine Koranda, the department’s spokeswoman, said in an email.

“Any other assessment at this point is speculative,” she said.

Senate Minority Leader Anthony Hensley, a Topeka Democrat, issued a statement saying that the administration had been trying to deceive Kansans.

“It’s time for the Brownback administration to take responsibility for their failed experiment and give Kansans the full report on the true causes of this self-imposed fiscal disaster,” Hensley said.

Mark Dugan, Brownback’s campaign manager, said the tax cuts should not be judged solely by their impact on revenue, but also on the impact to the Kansas economy.

“Our policies are working,” Dugan said, pointing to the state’s unemployment rate of less than 5 percent.

“Kansans have more money in their pockets today because of tax cuts implemented by Gov. Brownback and the Legislature. We think Kansans can spend money more appropriately than the government can.”

The state has lagged behind the nation in economic growth, according to the Federal Reserve Bank in Philadelphia. Between April 2013 and April 2014, the nation’s economy grew 3 percent, while Kansas’ economy grew 2.4 percent.