Democrat gubernatorial candidate Paul Davis should probably stop letting reporters advise him on tax policy. Citing a Hutchinson News editorial, Davis – the Lawrence, Kansas Democrat – has dubbed Governor Brownback’s tax reform efforts, “A Kansas failure-tale.”
Why is it, in the eyes of Davis and Hutchinson News editorial board, a “failure-tale”? Because of a $92 million gap between April revenue estimates and what actually came in to the state. Hutchinson News pointed the finger at Brownback and Davis more than obliged by adopting their editorial as his own set of talking points – going so far as to post it on his campaign’s website, Facebook page, and Twitter account.
There’s only one problem with the claim that Gov. Brownback’s tax reform is responsible for the $92 million gap. The Congressional Budget office and Democrats in other states say otherwise. They point to the shift of capital gains income from 2013 to 2012 to avoid higher tax rates due to the Fiscal Cliff as the cause of state revenue shortfalls compared to estimates.
A quick glance at the CBO’s Monthly Budget Review would have provided some clarity for Davis and Hutchinson News. For instance, the January 2013 report notes: “Nonwithheld tax receipts for the first four months of the fiscal year rose by $15 billion (or 18 percent), mostly owing to the January boost brought about by taxpayers’ shifting of income from calendar year 2013 into late 2012 in anticipation of higher tax rates.”
By April 2013, total nonwithheld receipts had risen by 30 percent – and the CBO’s reason for why?
Nonwithheld receipts rose by $80 billion (or 30 percent), primarily because of higher payments made during the tax-filing season (February through April). Those payments—largely representing final payments for the 2012 tax year—increased by $66 billion (or 36 percent). Income tax refunds declined by $6 billion, further boosting receipts. The large increase in payments accompanying people’s income tax returns probably reflects the fact that higher-income taxpayers, anticipating changes in tax law, realized more income in 2012.
Yes the Kansas revenue estimates were higher than what was actually taken in, but it was not Brownback’s tax reform that caused the gap. It was President Obama’s insistence against the extension of the Bush tax cuts and the Fiscal Cliff that caused taxpayers across America to shift their capital gains into 2012 to avoid the tax hikes in 2013. That shift of taxable dollars impacted states as well.
Paul Davis’s own party leaders acknowledge that the expiration of the Bush tax cuts caused gaps between collections and estimates. Connecticut’s The Day noted:
Gov. Dannel P. Malloy announced on Monday that the projected $505 million surplus would be down by several million dollars. His budget chief, Benjamin Barnes, said this was likely due to the expiration of George W. Bush-era tax cuts that encouraged people to claim capital gains in 2012 and likely discouraged them from claiming them in 2013 when taxes increased.
How bad is the shortfall in Connecticut? The Day notes: “Connecticut’s budget surplus this year, recently projected at $505 million, has dropped to $43.4 million, while next year’s revenues are projected to come up $282 million short.”
Other states are in a similar boat. Oklahoma’s collections in the month of February fell nearly 10 percent below state estimates. The Courier-Journal in Kentucky cites a report that estimates the state will fall $27.7 million short of budgeted expectations.
Paul Davis’s penchant for political gamesmanship over facts and his reliance on the expertise of the Hutchinson News editorial board when it comes to questions of tax policy should make Kansas voters wary of who would advise him if he ever managed to get elected governor.