The Dire Condition of Kansas’ State Budget

Kansas State Budget

State of Kansas

In 2012, Kansas governor Sam Brownback and the state legislature passed a measure to reduce state income tax rates for all Kansans and eliminate income tax for some 300,000 LLCs. Brownback and his fellow statesmen reasoned that such a measure would re-energize the state economy and promote job creation; neither Brownback nor any of the legislators believed that such a reduction would have a net negative impact of the state pocketbook. As it turns out, the cuts — which only took effect in 2014 — have led to a massive downfall in tax revenue and prompted a variety of new measures in order to cover the shortage.

The figures for the most recent fiscal years show the extent of the problem with unmistakable clarity. In 2013, the state of Kansas brought in $2.931 billion; this was a modest increase from the $2.908 billion which was collected in 2012. In 2016, Kansas collected a startlingly low $2.249 billion. To put it differently, as a result of the cuts, in 2016 Kansas collected roughly $650 million less in individual income tax dollars than in every year prior to the passing of the cuts. Though all positive intent may be imparted to him, the governor’s actions have created a distressful predicament for the state’s budget.

Kansas has actually lost 700 jobs over the course of the past year and currently ranks sixth worst in the nation in terms of rate of job growth. In response to the revenue downfall, the state has been compelled to divert more than $1 billion away from road improvements, implement a sizable sales tax increase, slash tens of millions of dollars from higher education and exhaust all of its cash reserves. Though they were intended to promote economic growth, given the consequences which have followed it is impossible to call the tax cuts of 2012 anything but a failure.

The governor has attempted to downplay the role of the tax cuts in creating the financial quandary: he’s alleged that recent financial projections have been overly optimistic, he’s highlighted the poor performance of the farm and oil industries, and he’s also reminded everyone that Kansas brought in more money in 2016 than in 2015. But these attempts ultimately fail to excuse the fact that, so far, the 2012 tax cuts have failed to deliver the benefits he promised and have led to the awful financial situation we see today.

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Alaska’s Current Tax Debate

Alaska Tax Debate

State of Alaska

The decline in oil tax revenue has sparked an important debate among Alaskan policymakers. Historically, Alaska’s oil supply has resulted in surpluses for its state government; now, with oil production on the decrease, state legislators are seeking measures in order to confront the newly created deficit. At this point, the debate has narrowed down to whether Alaska should adopt a state personal income tax or a sales tax. Alaska has been without a state personal income tax for 35 years and it has never collected sales taxes in its entire history.

The Institute for Taxation and Economic Policy (ITEP) released a report back in mid-July which addressed the issue of Alaska’s revenue woes. The report – which was entitled “Income Tax Offers Alaska a Brighter Fiscal Future” – makes the case that implementing personal income taxes for Alaskan residents is the better option. Essentially, the report propounds that adopting a personal income tax is more equitable, more sustainable in the long-term and also more financially beneficial to the bulk of Alaskans.

Though the debate is alive and well, several actions have already been taken. Governor Bill Walker has already made cuts to state spending and substantially curtailed tax breaks available to the oil industry. What’s more, Walker also reduced the maximum amount Alaskans may receive through the Permanent Fund; each person may now receive a maximum of $1,000 rather than the previous maximum of $2,072. The Permanent Fund is a statewide fund established to help ensure that a greater share of the Alaskan population benefits from the state’s oil stock.

Bringing balance to Alaska’s fiscal quandary will be no easy matter. Whatever option is selected, there will be a sizeable bite taken out of Alaskan pocketbooks. The hope is that the settling of Alaska’s revenue problems won’t disproportionately affect lower to middle level income families. So far, with all available evidence taken into consideration, it appears that reinstituting a personal income tax in conjunction with a few other measures is the surest means to provide both an equitable and sustainable financial future. Only time will tell if this is indeed the means which will be adopted.

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