August 29, 2014

August tax revenues higher than projected

Gene Meyer
Kansas Reporter
TOPEKA – Kansas retail sales tax collections appeared to jump about 20 percent last month. But it is still too soon to tell if that will heal the state’s wounded budget, say officials waiting this week for a more complete look at the numbers.

A preliminary report released last week by the Kansas Department of Revenue indicated that August sales tax revenues in the state soared to $168.7 million, nearly $23 million higher than month-earlier levels, $28 million more than in August, 2009, and nearly $26 million above official projections.

Give or take a few percentage points, the higher than predicted sales-tax revenues are very close to an 18.9 percent sales tax increase that was produced by a July 1, one-penny boost in Kansas basic sales tax rates to 6.3 percent.

“That isn’t enough to conclude things have turned around,” said John Wong, a University of North Texas at Dallas economist serving on the state panel that makes official Kansas revenue projections,

“It’s better than if they’d gone the opposite way, but it’s still too early to break out the champagne,” Wong said.

State officials chose not to reflect the full increase into their projections immediately last spring, because no one was sure how consumers would react to the then-pending increase, said Steve Stotts, the Kansas Department of Revenue’s taxation director, who also serves on the projections panel.

“There was a lot of talk going around about how consumers might go out and buy things ahead of time to beat the tax, or that collections might drop after the tax increased,” Stotts said.

Consequently, revenue watchers decided to wait two months, instead of the normal one, to begin cranking the sales tax increases into their formal projections, he said.

Few retailers in Kansas saw double digit sales increases. Both the U.S. Commerce Department and the National Retail Federation report that August sales barely changed from the previous month and only about 5 percent higher or less than in 2009.

Retailers typically collect sales taxes every day from consumers and send the totals to the state at the end of the month.

Thus, many of the increased taxes consumers started paying in July wouldn’t show up in state reports until August.

Until the increases are fully reflected, it’s unclear how much revenues must actually increase to provide the approximately 2 to 3 percent increase in general tax revenues that Duane Goossen, the state’s budget director, said is a general baseline for rational growth in the state budget.

If none of the increase were reflected, sales tax revenues would have to grow as much as 21 percent to encompass both the rate increase and the hoped for baseline growth.

For now, “we’re two months into the fiscal year and a little ahead,” Goossen said.

Officials are hoping three or four consecutive months of on target or higher growth would signal surer healing of the state budget, he said.

“If September and October would come in at or above our projections, that would be great,” he said.

Kansas Legislative Research Department specialists hope this week to complete an analysis of the preliminary numbers and release a full report on August revenue trends, said Alan Conroy, the department’s executive director.

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