GOVERNOR’S COUNCIL

ON TAX REFORM

Laura Kelly Governor of the State of Kansas

GOVERNOR’S COUNCIL ON TAX REFORM

Janis Lee Co-Chair

Former Kansas State Senator

Steve Morris Co-Chair

Former President of the Kansas State Senate

Carl Brewer Former Mayor of Wichita

Lon Frahm Chief Executive Officer at Frahm Farmland, Inc.

Duane Goossen Former Kansas Division of Budget Director, Secretary of Administration,

and member of the Kansas House of Representatives

Joe Grisolano Crawford County Treasurer

Dennis Hays Hays and Associates, LLC and former County Administrator for the Unified Government of Wyandotte County and Kansas City, Kansas

Anthony Hensley Current Minority Leader in the Kansas State Senate

Shannon Kimball President, Kansas Association of School Boards

Audrey Langworthy Former member of the Kansas State Senate and Chair of the Kansas State

Senate Committee on Assessment and Taxation

Tom Sawyer Current Minority Leader in the Kansas House of Representatives

Susan Sherman Olathe Assistant City Manager

Anthony Swartzendruber Harvey County Administrator

Larry Weins Vice President of Finance at Sprint

John Wilson Vice President of Advocacy for Kansas Action for Children and former

member of the Kansas House of Representatives

Mark A. Burghart Kansas Secretary of Revenue

Ex-Officio Member

Larry Campbell Kansas Division of Budget Director

Ex-Officio Member

Julie Lorenz Kansas Secretary of Transportation

Ex-Officio Member

David Toland Kansas Secretary of Commerce

Ex-Officio Member

TABLE OF CONTENTS

INTRODUCTION .................................................................................................................................................... i

The Tax Council’s Mandate ................................................................................................................................. i

Focus of the Tax Council’s Work ........................................................................................................................ i

COUNCIL ACTIVITIES ........................................................................................................................................ ii

EXECUTIVE SUMMARY .................................................................................................................................... iii

1. BASIC PRINCIPLES GUIDING THE FORMATION OF KANSAS TAX POLICY ................................1

1.1 Fairness/Equity ...........................................................................................................................................1

Horizontal Equity ....................................................................................................................................1

Vertical Equity ........................................................................................................................................1

1.2 An Efficient Tax System .............................................................................................................................1

Simplicity ................................................................................................................................................1

Stability ...................................................................................................................................................1

Neutrality ................................................................................................................................................2

Tax Base .................................................................................................................................................2

2. KANSAS BUDGET AND TAX POLICY ........................................................................................................2

2.1 State General Fund Profile ..........................................................................................................................2

2.2 Revenue Projections ...................................................................................................................................2

3. DISTRIBUTION OF TAX BURDENS ............................................................................................................3

4. COUNCIL’S RECOMMENDATIONS ...........................................................................................................3

4.1 Food Sales Tax Refundable Income Tax Credit .........................................................................................3

4.2 Local Ad Valorem Property Tax Reduction Fund (LAVTR) ......................................................................3

4.3 Marketplace Facilitators .............................................................................................................................4

4.4 Digital Products ..........................................................................................................................................4

4.5 Reaffirmation of the “Three-Legged Stool” ...............................................................................................4

4.6 Caution by the Governor and the Legislature .............................................................................................5

4.7 Tax Lid Exemption .....................................................................................................................................5

5. FUTURE COUNCIL ACTIVITY ....................................................................................................................6

APPENDICES Appendix 1: Executive Order 19-11

Appendix 2: State General Fund Profile

Appendix 3: Tax Receipts by Source

Appendix 4: Impact of Food Sales Tax Cuts on Hypothetical Taxpayers

Appendix 5: Mill Levy Table

Appendix 6: Relative Shares of State Taxes

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INTERIM REPORT OF THE GOVERNOR’S COUNCIL ON TAX REFORM

INTRODUCTION

The Tax Council’s Mandate

On September 9, 2019, Governor Laura Kelly issued Executive Order No. 19-11 establishing the

Governor’s Council on Tax Reform. The Governor directed the Council to:

• identify goals, initiatives, performance metrics, and other methods of assessing or

achieving increased effectiveness and fairness in the state’s tax system;

• explore, assess, recommend, and report on various tax strategies and policies that may

increase the effectiveness and fairness of the state’s tax system;

• receive input from the public – including relevant non-for-profit or business stakeholders,

experts, and other organizations not represented on the Council – regarding various tax

strategies or policies; and

• submit an initial report in December 2019, informing and advising the Governor of the

Council’s assessments and recommendations.

Executive Order No. 19-11 in its entirety is attached hereto as Appendix 1.

The Governor emphasized that Kansas fiscal health is still very much in a recovery phase and that it will

take time to repair the damage to the state public sector resulting from the failed tax policies implemented

in 2012. Even without major spending targeted at reversing that damage and notwithstanding the updated

revenue numbers added in the November 2019 Consensus Revenue Estimate, projections suggest the State

General Fund will still be heading toward a deficit position within several fiscal years. The Governor

urged extreme caution when considering any tax policy changes that could negatively impact any

sustained recovery effort.

Focus of the Tax Council’s Work

In light of the well-defined charge from the Governor, the Council focused its deliberations on the widely-

adopted principles of equity, adequacy, and stability as the guiding principles for Kansas tax policy and

reform. The Council also concentrated on the concept of the balanced “three-legged stool” approach to

state and local finance. Lastly, the Council agreed that any and all changes moving forward needed to be

evaluated with an emphasis on making the overall tax structure less regressive and more progressive.

These principles are not unique to Kansas, but are the same principles guiding other state reform efforts

across the country.

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COUNCIL ACTIVITIES

At its initial meeting on September 24 and 25, 2019, the Council heard various presentations including:

an Overview of State Tax Policy Changes since 2012, the then-Current Kansas Consensus Revenue

Estimate and State General Fund Profile, the History and Current Status of Economic Development in

Kansas, the History and Current Status of Transportation in Kansas, the Current Kansas Labor Outlook, a

review of the United States Supreme Court decision in South Dakota v. Wayfair, Inc. and Notice 19-04-

Sales Tax Requirements for Retailers Doing Business in Kansas, an Overview of the Kansas Property Tax

System, and a Summary of Selected Literature by Dr. Donna Ginther. The Council approved the

engagement of Dr. Donna Ginther and the Institute for Policy and Social Research at the University of

Kansas to perform tax policy analysis, tax incidence studies and other research as directed by the Council.

On October 15 and 16, 2019, the Council received additional information including: a State Budget

Update, an Overview of 2019 Tax Legislation – S.B. 22; the History of Tax Conformity and State

Conformity Issues; comments from Senator Tom Holland, Representative Jim Gartner, and Representative

Steven Johnson; the History of Food Sales Tax and Food Sales Tax Rebate Program; an Analysis of Tax

Policy from the 2019 Legislative Sessions; an Update on the Wayfair Issue; an update on the Status of the

State General Fund Revenue; and suggestions from Dr. Donna Ginther regarding future research.

At its November 14, 2019 meeting, the Council received a Budget and Consensus Revenue Estimate

Update, public comments from the Kansas Association of Realtors, Kansas Association of School Boards,

Kansas Head Start, Kansas Chamber of Commerce, KC Healthy Kids, Greater KS Food Policy Coalition,

Sister Therese Bangert, Jack Nott, Carol Supancic, and Vashti Winterburg. The Council also received

presentations on Global Intangible Low-Taxed Income and the Ad Valorem Property Tax and History of

the “Three-Legged Stool” in Kansas.

Finally, the Council devoted December 3, 2019 to policy discussions and the development of

recommendations to the Governor and Legislature for consideration during the 2020 Legislative Session.

While the Council will continue to study larger possible reforms to the state tax structure and tax policy

during 2020, the Council nevertheless believed that initial recommendations were needed to address

certain targeted tax policies and provide focused current tax relief where it was most needed.

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EXECUTIVE SUMMARY The bipartisan group performing an in-depth study over the course of two calendar years submitted its

initial recommendations for consideration by the 2020 Kansas Legislature. The Council will continue its

work during 2020 and make its final report prior to the start of the 2021 Kansas Legislature. The Council

made the following initial recommendations:

• The Council urges caution with the Governor and Legislature related to any proposals that

would diminish revenue until Kansas has fully regained its fiscal health;

• The Council recommends that Kansas seek to restore the balanced three-legged stool of

income tax, sales tax and property tax to fund state and local government services;

• The Council recommends a new refundable food sales income tax credit that would be

based on federal adjusted gross income;

• The Council recommends that the Local Ad Valorem Tax Relief Fund be funded by the

2020 Legislature;

• The Council recommends that the sales of digital assets such as digital books, music and

subscription services be subject to sales tax in order to restore equity to the sales tax act;

• The Council recommends that legislation be enacted to require marketplace facilitators to

collect and remit tax on products sold into the State of Kansas;

• The Council recommends that an exemption be made to the existing property tax lid for

the funding for local transportation projects; and

• The Council identified other topics and issues for further study in 2020, including proposals

to broaden the tax base, an examination of the regressivity or progressivity of the Kansas

tax system, a review of the earned income tax credit, an examination of the current property

tax lid, continued review of the sales tax on food, further examination of the income tax

implications arising from 2017 income tax reform, a comparison of the Kansas tax structure

with surrounding states and a general review of the state property tax system.

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1. BASIC PRINCIPLES GUIDING THE FORMATION OF KANSAS TAX POLICY

1.1 Fairness/Equity

Historically, the fairness of a state tax system has been determined using two key measures: horizontal

equity and vertical equity. Dr. Donna Ginther explained the applicability of these important concepts to

the Council’s work as part of her detailed testimony on November 14, 2019.

Horizontal Equity

At its basic level, horizontal equity provides that taxpayers in the same financial circumstances with equal

ability to pay should bear the same tax burden. Exemptions or deductions for some but not all taxpayers

would negate horizontal equity and create horizontal inequity.

Vertical Equity

Vertical equity is based on the premise that those who earn more money or have more economic resources

should be taxed at higher rates than those earning less income and having fewer economic resources.

Vertical equity promotes proportional or progressive taxes where tax as a share of income increases as

income increases those with a greater ability should pay more.

1.2 An Efficient Tax System

The costs of administering and collecting taxes should be kept as low as possible for both taxpayers and

the agency charged with administering the tax system. Prior Kansas tax review commissions and virtually

all other state tax study commissions nationwide have recognized the following elements of an efficient

tax system.

Simplicity

A simple tax code eases the administrative burden for taxpayers and the tax agency. A simpler tax system

is also more transparent.

Stability

Stability in a state tax system provides a degree of certainty for individuals and businesses alike that allows

them to plan for the future. A stable tax system also reduces compliance and tax administration costs. It

also provides a predictable revenue stream upon which states can rely when structuring budgets.

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Neutrality

A tax code should be applied uniformly without exemptions or exclusions that can distort the process of

making economic decisions.

Tax Base

A tax structure should be designed such that the base for each tax is as broad as possible and is not

unnecessarily narrowed. Under such a structure, tax rates can be maintained at the lowest possible level

resulting in enhanced compliance, public acceptability, and stability of the revenue resources.

See Kansas Tax Review Commission, June 1985, pp. GR 3-4; Governor’s Task Force on Tax Reform,

January 1988, pp. 18-19; and Governor’s Tax Equity Task Force, December 1995, pp. 12-13 for findings

by other Kansas tax reform commissions.

2. KANSAS BUDGET AND TAX POLICY

2.1 State General Fund Profile

During the course of the Council’s work, several updates were provided to the Council regarding the

outlook for the State General Fund. The Council was made aware of the damage sustained by the state

budget as a result of the tax-cutting measures enacted in 2012. After five years of underperforming

revenue receipts, the 2017 Legislature passed legislation in an attempt to begin to restore the state to fiscal

solvency. Notwithstanding these efforts, the Council recognized that the progress to sustained fiscal

integrity will take time as many underfunded programs had suffered mightily from the prior tax policy.

Even with the 2017 legislative changes, the Division of the Budget projections for the State General Fund

presented to the Council during its October meeting showed ending balances of ($54.6) Million in FY2022

and ($563.5) Million in FY2023. The complete profile for the State General Fund presented to the Council

appears at Appendix 2.

Tax policy cannot be considered in a vacuum. The expense side of the state ledger must also be considered

when considering fundamental changes to the overall tax structure. The Council is guided by the direction

from the Governor that the Council be fiscally responsible and address changes that result in a fair and

sustainable tax structure into the future.

2.2 Revenue Projections

The Council is mindful that current revenue estimates can change quickly with national economic

developments. The estimates set forth by the Consensus Revenue Estimating Group are just that –

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estimates. The estimates from the November 7 meeting of the Group reflect a 3.8% growth for FY2020

and a .3% growth for FY2021. Total receipts for FY2020 are estimated to be $7,652,100,000 and

$7,675,500,000 for FY2021. Appendix 3 sets forth a detailed breakdown of tax receipts by source. Any

degree of economic downturn could negatively impact estimated receipts in a meaningful way.

3. DISTRIBUTION OF TAX BURDENS The Council recognized that it would not be able to obtain much of its requested research and fiscal

analysis of various proposed tax changes prior to the 2020 Legislative Session. The Council requested

that a tax incidence model be developed by Dr. Ginther. As explained by Dr. Ginther, state tax incidence

models are much more complicated than federal models. Few states have a complete distributional

analysis for their tax system. To assist the Council, however, Dr. Ginther will undertake to develop a set

of hypothetical taxpayers reflecting the demographics of the state to analyze various tax policy changes.

The hypotheticals to be developed by Dr. Ginther will measure total taxes paid, progressivity and

regressivity caused by the changes and implications for the “three-legged stool”. The analysis will be

presented to the Council during 2020 and prior to the 2021 Legislative Session.

4. COUNCIL’S RECOMMENDATIONS

4.1 Food Sales Tax Refundable Income Tax Credit

In order to reduce the regressivity of the sales tax on food, the Council recommends consideration of a

new refundable food sales income tax credit that will benefit as many as 400,000 Kansas households to

help offset state and local sales tax paid on groceries. Elimination of the prior food sales tax rebate

program in 2012 coupled with sales tax rate increases exacerbated the overall regressivity of the Kansas

tax structure. The Council notes that targeting this relief to low and moderate-income taxpayers would be

a more effective way of providing relief to those who need it the most than would lowering the rate by

one cent on all food purchases. The Council recognizes that proposals to reduce the food sales tax rate

are likely to be considered during the 2020 Legislative Session and notes that the hypothetical taxpayer

models being developed by Dr. Ginther will assist in evaluating such proposals compared to refundable

credit options. Appendix 4 sets forth net savings for hypothetical taxpayers from rate reductions on food.

4.2 Local Ad Valorem Property Tax Reduction Fund (LAVTR)

Levy rates are staggering, especially in many rural counties, and are a significant burden for homeowners

and constitute a major impediment to local economic development efforts. The latest mill levy statistics

are set forth in Appendix 5. In light of these rates, the Council recommends the favorable consideration

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of renewing LAVTR distributions, which have been suspended since 2002, with the proviso that an extra

share of available funds be distributed to those rural counties with the highest average mill levy.

4.3 Marketplace Facilitators

K.S.A. 79-3705c allows Kansas to require out-of-state retailers to register and collect and remit

compensating use tax on sales of tangible personal property into the State of Kansas. The Department of

Revenue issued notice No. 19-04 on August 1, 2019 notifying out-of-state retailers to register with the

State of Kansas. The existing statutory scheme does not allow Kansas to require marketplace facilitators

to do the same. A marketplace facilitator is a person who facilitates sales by an internet retailer through

a physical or electronic marketplace. Kansas is one of only five states that has not enacted a marketplace

facilitator provision. The Council recommends that the 2020 Legislature consider and pass legislation

that would require marketplace facilitators to register and begin collecting compensating use tax on sales

to Kansas customers. This legislation would further level the tax playing field that has for 52 years been

skewed in favor of out-of-state retailers and against in-state main street Kansas retailers.

4.4 Digital Products

Changes in technology have allowed what once were taxable sales of tangible personal property to avoid

tax merely because the property is delivered in digital format. The technological advances in the delivery

of products were never contemplated 82 years ago when the state sales and use tax was enacted in 1937.

The state and local sales tax base continues to shrink in light of these unintended exclusions. The Council

believes that the current treatment of digital asset sales is not fair and equitable. The inclusion of digital

products in the sales and use tax base would be another step toward leveling the playing field between

brick-and-mortar stores and retailers selling digital products. The Council recommends that the 2020

Kansas Legislature join the other 29 states to include the sale of digital products in the state and local sales

tax base.

4.5 Reaffirmation of the “Three-Legged Stool”

History will reflect that policymakers in 1992 made a conscious decision to reduce the property tax leg of

the stool by increasing income and sales taxes and providing funds to schools to provide property tax relief

through the then new K-12 funding law. This balanced approach was embraced by members of both

parties for 20 years. Indeed, the Governor’s Tax Equity Task Force formed by Governor Bill Graves in

1995 embraced the balanced “three-legged” approach and concluded that a balanced and diversified

approach would reduce problems caused by over-reliance on a single revenue source. There are equity

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considerations implicit in this broad-based approach to state and local taxes. In relying on all three major

sources, there is one that is considered regressive (sales), one progressive (income) and one somewhere

in between (property).

The Council believes the stool has again moved out of balance and is too property tax heavy due in large

part to the massive income tax reductions between 2012-2016 that effectively shortened that leg of the

stool. The latest figures show that for FY19, the property/vehicle leg was over 34 percent of total state

and local taxes, sales/use taxes 28 percent, and income/privilege taxes only 26 percent. See Appendix 6.

Relative Shares of Total Kansas State and Local Taxes

FY 1992 FY 1998 FY 2012 FY 2017 FY 2019

Property/Vehicle 38.73% 30.89% 34.04% 37.08% 34.29%

Sales/Use 22.80% 28.07% 28.35% 31.17% 28.00%

Income/Privilege 21.13% 27.97% 24.64% 19.43% 26.45%

All Other 17.34% 13.07% 12.97% 12.32% 11.26%

The Council recommends that a return to the old notion of a more balanced “three-legged stool” again be

a guiding principle for all future tax policy discussions and decisions.

4.6 Caution by the Governor and the Legislature

Given the devastation to the public sector brought about by the ill-conceived tax policy in 2012, the

Council recommends that the Governor and the Legislature exercise extreme caution when considering

proposals that would diminish revenue until Kansas has fully restored its fiscal health, including creation

of a “rainy-day fund” and an end to the transfer of highway dollars to the State General Fund. The damage

to the state has been great and the return to financial normalcy will take time.

4.7 Tax Lid Exemption

An issue of critical importance to the continued cost-share approach to transportation projects concerns

the local property tax lid. The Council recommends consideration of legislation that would provide an

exemption from the tax lid for cities and counties for transportation costs that would allow the local units

to participate in the funding of infrastructure projects as partners with the state.

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5. FUTURE COUNCIL ACTIVITY

The Council met four times during 2019. The recommendations set forth in this report are those that could

be addressed prior to the 2020 Legislative Session. The Council’s mandate is that it continue to meet for

the next year to again make recommendations in advance of the 2021 Legislative Session. The Council’s

work over the next year will be comprehensive and will include:

• proposals to broaden the tax base by examining the continued efficacy of certain

exemptions and exclusions;

• an examination of the nature of the Kansas tax structure to determine its progressivity or

regressivity to be conducted by expert economists;

• a review of the earned income tax credit;

• an examination of the current property tax lid and the policy issues associated with the lid;

• continued review of the issue of imposing sales tax on food;

• implications of 2017 federal tax reform as they relate to itemized deductions and the

taxation of foreign source income;

• a comparison of the Kansas tax structure and those surrounding states; and

• a general review of the property tax system and options for relief from excessive valuations

and levies.

Respectfully submitted on behalf of the Governor’s Council on Tax Reform

Steve Morris, Co-Chair

Janis Lee, Co-Chair

APPENDICES

Appendix 1: Executive Order 19-11

Appendix 2: State General Fund Profile

Appendix 3: Tax Receipts by Source

Appendix 4: Impact of Food Sales Tax Cuts on Hypothetical Taxpayers

Appendix 5: Mill Levy Table

Appendix 6: Relative Shares of State Taxes

Division of the Budget Landon State Office Building Phone: (785) 296-2436 900 SW Jackson Street, Room 504 larry.campbell@ks.gov Topeka, KS 66612 http://budget.kansas.gov

Larry L. Campbell, Director Laura Kelly, Governor

Division of the Budget

November 7, 2019 To: Governor Laura Kelly and Legislative Coordinating Council From: Division of the Budget and Kansas Legislative Research Department Subject: State General Fund Revenue Estimate for FY 2020 and FY 2021

The Consensus Estimating Group met today to revise the State General Fund revenue estimate for FY 2020 and FY 2021. A more detailed memo will be available soon which contains the economic forecast for Kansas upon which the estimates are based, as well as a discussion of other factors influencing the individual source estimates. Estimates for the State General Fund are developed using a consensus process that involves the Division of the Budget, Legislative Research Department, Department of Revenue, and three consulting economists from state universities. This estimate is the base from which the Governor and the Legislature build the annual budget. Consensus revenue estimates are based on current federal and state laws and their current interpretation.

The overall estimate for FY 2020 and FY 2021 was increased by a combined $525.5

million. The estimate for total taxes was increased by $510.0 million, and other revenues were increased by $15.5 million for the two years combined.

For FY 2020, the estimate was increased by $220.4 million, or 3.0 percent, above the

previous estimate (made in April and subsequently adjusted for legislation enacted during the veto session). The estimate for total taxes was increased by $207.0 million, while the estimate for other revenues was increased by $13.4 million. The revised estimate of $7.652 billion represents 3.8 percent above final FY 2019 receipts.

The revised estimate for FY 2021 is $7.676 billion, which is $305.1 million, or 4.1 percent,

above the previous estimate. The estimate for total taxes was increased by $303.0 million, while the estimate for other revenues was increased by $2.1 million. The revised forecast for FY 2021 represents a 0.3 percent increase above the newly revised FY 2020 figure.

Table 1 compares the revised estimates for FY 2020 and FY 2021 with actual receipts from

FY 2019. Tables 2 and 3 show the revisions in each fiscal year’s estimates.

Consensus Estimate November 7, 2019FY 2019 (Actual) FY 2020 (Revised) FY 2021 (Revised)

Amount Amount AmountProperty Tax/Fee:

Motor Carrier 11,852$ (4.7) % 12,400$ 4.6 % 12,500$ 0.8 %

Income Taxes:Individual 3,755,710$ 11.3 % 3,910,000$ 4.1 % 4,065,000$ 4.0 %Corporation 437,400 11.5 465,000 6.3 475,000 2.2 Financial Institutions 48,648 6.9 43,000 (11.6) 44,000 2.3

Total 4,241,759$ 11.3 % 4,418,000$ 4.2 % 4,584,000$ 3.8 %

Excise Taxes:Retail Sales 2,335,436$ (0.3) % 2,395,000$ 2.6 % 2,430,000$ 1.5 %Compensating Use 431,967 6.3 445,000 3.0 475,000 6.7 Cigarette 116,693 (2.8) 110,000 (5.7) 107,000 (2.7) Tobacco Products 8,968 3.4 8,900 (0.8) 9,000 1.1 Tobacco Products 22,080 3.5 21,500 (2.6) 22,000 2.3 Liquor Enforcement 74,267 1.1 74,500 0.3 75,500 1.3 Liquor Drink 12,208 5.7 12,500 2.4 13,000 4.0 Severance 41,696 0.7 20,500 (50.8) 22,000 7.3

Gas 9,905 (23.3) 700 (92.9) 1,700 142.9 Oil 31,791 11.6 19,800 (37.7) 20,300 2.5

Total 3,043,314$ 0.6 % 3,087,900$ 1.5 % 3,153,500$ 2.1 %

Other Taxes:Insurance Premiums 163,283$ (4.6) % 171,500$ 5.0 % 171,500$ -- %Corporate Franchise 7,352 (1.8) 7,200 (2.1) 7,200 -- Miscellaneous 3,743 38.7 4,000 6.9 4,200 5.0

Total 174,378$ (3.8) % 182,700$ 4.8 % 182,900$ 0.1 %

Total Taxes 7,471,302$ 6.3 % 7,701,000$ 3.1 % 7,932,900$ 3.0 %

Other Revenues & Receipts:Interest 48,943$ 114.8 % 50,000$ 2.2 % 30,000$ (40.0) %Transfers & Other Receipts (202,361) (202.0) (146,600) 27.6 (335,100) (128.6) Agency Earnings 50,549 9.8 47,700 (5.6) 47,700 --

Total (102,870)$ (138.5) % (48,900)$ 52.5 % (257,400)$ (426.4) %

Total Receipts 7,368,432$ 1.0 % 7,652,100$ 3.8 % 7,675,500$ 0.3 %

Table 1State General Fund Receipts

(Dollars in Thousands)

Change ChangePercent Percent Percent

Change

2

Table 2

FY 2020 CRE Est. FY 2020 CRE Est.As Adj. for Legis. Revised 11/07/19 Amount

Property Tax/Fee:Motor Carrier 12,400$ 12,400$ --$ -- %

Income Taxes:Individual 3,750,000$ 3,910,000$ 160,000$ 4.3 %Corporation 450,000 465,000 15,000 3.3 Financial Institutions 42,000 43,000 1,000 2.4

Total 4,242,000$ 4,418,000$ 176,000$ 4.1 %

Excise Taxes:Retail Sales 2,344,993$ 2,395,000$ 50,007$ 2.1 %Compensating Use 440,000 445,000 5,000 1.1 Cigarette 110,000 110,000 -- -- Tobacco Products 8,900 8,900 -- -- Liquor Gallonage 21,100 21,500 400 1.9 Liquor Enforcement 74,500 74,500 -- -- Liquor Drink 12,200 12,500 300 2.5 Severance 34,700 20,500 (14,200) (40.9)

Gas 7,500 700 (6,800) (90.7) Oil 27,200 19,800 (7,400) (27.2)

Total 3,046,393$ 3,087,900$ 41,507$ 1.4 %

Other Taxes:Insurance Premiums 182,000$ 171,500$ (10,500)$ (5.8) %Corporate Franchise 7,400 7,200 (200) (2.7) Miscellaneous 3,800 4,000 200 5.3

Total 193,200$ 182,700$ (10,500)$ (5.4) %

Total Taxes 7,493,993$ 7,701,000$ 207,007$ 2.8 %

Other Revenues & Receipts: Interest 54,000$ 50,000$ (4,000)$ (7.4) % Transfers & Other Receipts (167,600) (146,600) 21,000 12.5 Agency Earnings 51,300 47,700 (3,600) (7.0) Total (62,300)$ (48,900)$ 13,400$ 21.5 %

Total Receipts 7,431,693$ 7,652,100$ 220,407$ 3.0 %

DifferencePct. Chg.

State General Fund ReceiptsFY 2020 Revised

(Dollars in Thousands)Comparison of November 2019 Estimate to May 2019 Estimate

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Table 3

FY 2021 CRE Est. FY 2021 CRE Est.As Adj. for Legis. Revised 11/07/19 Amount

Property Tax/Fee:Motor Carrier 12,500$ 12,500$ --$ -- %

Income Taxes:Individual 3,850,000$ 4,065,000$ 215,000$ 5.6 %Corporation 455,000 475,000 20,000 4.4 Financial Institutions 43,000 44,000 1,000 2.3

Total 4,348,000$ 4,584,000$ 236,000$ 5.4 %

Excise Taxes:Retail Sales 2,359,993$ 2,430,000$ 70,007$ 3.0 %Compensating Use 455,000 475,000 20,000 4.4 Cigarette 107,000 107,000 -- -- Tobacco Products 9,000 9,000 -- -- Liquor Gallonage 21,500 22,000 500 2.3 Liquor Enforcement 75,500 75,500 -- -- Liquor Drink 12,300 13,000 700 5.7 Severance 32,600 22,000 (10,600) (32.5)

Gas 6,800 1,700 (5,100) (75.0) Oil 25,800 20,300 (5,500) (21.3)

Total 3,072,893$ 3,153,500$ 80,607$ 2.6 %

Other Taxes:Insurance Premiums 185,000$ 171,500$ (13,500)$ (7.3) %Corporate Franchise 7,500 7,200 (300) (4.0) Miscellaneous 4,000 4,200 200 5.0

Total 196,500$ 182,900$ (13,600)$ (6.9) %

Total Taxes 7,629,893$ 7,932,900$ 303,007$ 4.0 %

Other Revenues & Receipts: Interest 55,000$ 30,000$ (25,000)$ (45.5) % Transfers & Other Receipts (365,800) (335,100) 30,700 8.4 Agency Earnings 51,300 47,700 (3,600) (7.0) Total (259,500)$ (257,400)$ 2,100$ 0.8 %

Total Receipts 7,370,393$ 7,675,500$ 305,107$ 4.1 %

Pct. Chg.

State General Fund ReceiptsFY 2021 Revised

Comparison of November 2019 Estimate to May 2019 Estimate(Dollars in Thousands)

Difference

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10 Donna K. Ginther, Ph.D. November 14, 2019

Impact of Food Sales Tax Cuts on Hypothetical Taxpayers

Food Sales Tax Savings are Higher for Higher Income Taxpayers

26 Donna K. Ginther, Ph.D. November 14, 2019

Percent of Total Kansas State and Local Taxes by Source for Selected Years

34.3%

37.1%

34.0%

30.9%

38.7%

28.0%

31.2%

28.4%

28.1%

22.8%

26.5%

19.4%

24.6%

28.0%

21.1%

0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0% 45.0%

FY 2019

FY 2017

FY 2012

FY 1998

FY 1992

Inc/Priv Sales/Use Prop/Veh