An economist with a Kansas free-market think tank cautions state legislators as they look at the latest revenue numbers and how they reflect what’s happening in the state.
“In economics, whether its in high school or even in college, we kind of learn that consumer purchasing makes up about 70 percent of our economy,” said Michael Austin with the Sandlian Center for Entrepreneurial Government at the Kansas Policy Institute. “If you increase the amount of goods and services you purchase, that most likely means our economy is going to grow, too. What does it mean for the Kansas economy if the tax that we take from those consumer purchases are not growing?”
The state’s sales tax has not grown for five months.
“This slow growth that we’re seeing in sales tax kind of flies in the face of what we’re looking at with income tax revenues,” said Austin. “If you look at this report, you’ll see that income tax revenues have grown 16 percent over the same time last year.”
The conclusion would then be that Kansans are not spending because they are concerned about having to continue to pay these higher income taxes.
“What you’re seeing here is the impact of three tax increases,” said Austin. “You have the two income tax increases that were passed in 2017 and then you also have the federal tax reform that was denied to Kansans by the state. That’s also factoring through.”
There’s also the specter of the potential need for additional tax increases if the state is ever to get back to having the statutorily required 7.5 percent ending balance and continuing to pay its KPERS obligations.
Image courtesy: Kansas Policy Institute