AP: Report: Tax plan causes 2018 shortfall

2/1/2013

TOPEKA (AP) — Kansas would face a $782 million budget shortfall in 2018 under Gov. Sam Brownback's tax plan, according to a government report released Thursday that was immediately questioned by conservative Republicans who support the governor's push for additional income tax cuts.

TOPEKA (AP) — Kansas would face a $782 million budget shortfall in 2018 under Gov. Sam Brownback's tax plan, according to a government report released Thursday that was immediately questioned by conservative Republicans who support the governor's push for additional income tax cuts.

The report from the nonpartisan Legislative Research Department undercuts Brownback's argument that his proposals would stabilize the budget and build healthy cash reserves while allowing the state to follow up on aggressive income tax cuts enacted last year.

The conservative GOP governor wants to phase in additional cuts in individual income tax rates over three years. He proposes to balance the budget and build cash reserves by eliminating two popular income tax deductions for homeowners and keeping the state's sales tax at its current 6.3 percent rate. The sales tax is scheduled to drop to 5.7 percent in July under budget-balancing legislation enacted three years ago.

Critics of Brownback's proposals saw the researchers' report as evidence that those plans and his long-term goal of phasing out individual income taxes are reckless. Even if the governor's plan shored up the budget in the short-term, a gap between anticipated revenues and existing spending commitments still would arise in future years, they argued.

"Kansas is on its own fiscal cliff, and the governor is putting us there," said Senate Minority Leader Anthony Hensley, a Topeka Democrat who distributed the projections to reporters after researchers gave them to lawmakers.

But Revenue Secretary Nick Jordan said the researchers were probably too pessimistic in their assumptions for long-term revenue growth.

The researchers assumed that in future years, that the state's overall revenues would grow a little less than 4 percent a year, absent the income tax cuts. The state's tax collections actually grew 8.2 percent during the fiscal year that ended in June and were on track to grow 6.2 percent during the current fiscal year before the tax cuts enacted last year took effect in January.

Also, Brownback's administration and his legislative allies argue that cutting income taxes will spur economic growth.

"Five years out, we're expecting growth in the economy, which this can't account for," Jordan said of the legislative researchers' latest report.

The projections circulated at the Statehouse as the Senate Assessment and Taxation Committee wrapped up hearings on a bill containing the governor's proposals and made plans to debate them next week. The House Taxation Committee begins its own hearings on Brownback's plan next week.

House committee Chairman Richard Carlson, a conservative St. Marys Republican, said legislators may look at other numbers in assessing Brownback's proposals but noted that lawmakers generally discount the accuracy of long-term projections.

"You can't predict anything five years out," he said.

But when lawmakers were negotiating tax cuts last year, such long-term predictions were an issue because the same researchers projected that the reductions ultimately approved would create collective budget shortfalls approaching $2.5 billion over six years. When talks broke down, conservatives engineered passage of the most aggressive package drafted, and Brownback signed it, arguing that it was better than no cuts at all.

Meanwhile, both the administration and legislators are watching tax collections month-to-month because unanticipated revenues improve the state's short-term financial picture and any unexpected shortfall worsens it.

The Department of Revenue reported Thursday that the state collected $62 million more in taxes than expected in January, a total of nearly $635 million, or almost 11 percent above the official forecast for the month.

Furthermore, tax collections were about $3.7 billion in the first seven months of the current fiscal year, or $95 million more than officials had expected.

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