••• Tax & Spending •••

High March 2022 Kansas Tax Collection: Time for Tax Relief

In March 2022, the state of Kansas took in a total tax revenue of $679.6 million, which was a whopping 13.4% greater than the estimates for this month. This includes a sales tax collection that was 7.0% higher than expected and an income tax collection that was 16.9% higher than expected. The revenue collected for March of this year was 15.2% higher than what it was in March of last year. These continually high balances is a sign of over-taxation and an alarm bell that there needs to be tax relief.

In total, the tax revenues thus far in FY 2022 are approximately $6.4 billion – roughly 4.9% greater than the current budget predictions for FY 2022. Kansas continues on its way towards having an ending balance of around $3 billion by this June – if not more considering how high revenues continue to exceed expectations.

Kansas’ increased revenue intake over the past year isn’t unique as almost every state across the country is seeing an influx of cash. Missouri currently holds more than $4 billion in unappropriated funds from the past year. Colorado alone has $3.3 billion it can spend – not to mention $2.6 billion in COVID-19 relief funds on their plate too.

Kansas legislators still have time to give tax relief to the people, but the clock is ticking As only a few days remain on the calendar once the legislature comes back from their annual April break. If a mystery company can get a multi-billion dollar tax break to develop in the state, then ordinary Kansans who have struggled through the pandemic and economic recovery deserve help through tax relief too.

According to data compiled in our 2021 Green Book, the simple fact is that states that tax less grow more. The Tax Foundation’s 10 Lowest Tax Burden states in 2019 saw private-sector job growth of 28.7% between 1998 and 2020, whereas the 10 Highest Tax Burden States saw private-sector job growth of only 8.6% over the same time period. Low taxing states saw similarly high GDP growth and stronger domestic migration to their state compared to high taxing states.

Kansas needs a strategy to get out of its continued economic stagnation compared to the rest of the country. Between the 4th quarters of 2020 and 2021, the state was 0.9 percentage points below the national average in personal income growth, while at the same time, state and local government earnings increased by 0.7 percentage points. Tax relief is one way to reduce this stagnation because it gives people more choice over how they can spend their money – with money often going to support local businesses and jobs through purchases.

Legislators should be mindful to balance spending with potential revenue cuts down the road. However, something like a small rate reduction could provide long-term relief better than a one-time rebate. The overall reduction could be simple enough to factor into longer-term budget projections. Kansas has a top marginal income tax rate of 5.70%, which ranks middle-of-the-pack compared to states across the nation. Trimming this number and other tax rates for all incomes could make the state more attractive to business.