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Kansas revenue czar ‘hopeful’ budget picture remains stable in wake of COVID-19

Andrew Bahl
Topeka Capital-Journal
Revenue Secretary Mark Burghart speaks with the Topeka Capital-Journal in an interview Tuesday at the agency's headquarters.

The head of the state's revenue department is "hopeful" that tax collections continue to rebound from the COVID-19 pandemic to help ease concerns over the state's fiscal future.

Revenue Secretary Mark Burghart said in an interview with The Topeka Capital-Journal on Tuesday that there remain, however, numerous areas where the state could stand to gain ground in growing its revenue, including taxing subscriptions to Netflix, Spotify and other digital providers.

But the chief worry for many is the state of the budget, which has improved markedly since the spring, when the uncertain economic damage from COVID-19 caused predictions of a budget deficit of over $1 billion.

Updated projections from the state’s fiscal experts in November, however, show a budget shortfall of $152 million — a much more manageable gap to overcome, although future years had more uncertainty.

"We're hopeful that the numbers will be pretty stable going forward," Burghart said.

The pandemic has clearly influenced consumer spending habits, he noted, with the expectation that the holiday shopping season would mean a significant boost to taxes collected from online sales over a normal year.

But that doesn't mean the state is in a position to benefit from Kansans spending more of their time and money online. Burghart echoed calls from Gov. Laura Kelly to impose a tax on digital goods, such as subscriptions to Netflix or Spotify or purchases from the Amazon Kindle store.

Currently, the state does not get any cut of any purchases from those digital platforms, whereas a consumer buying a physical DVD, CD or book would have to pay sales tax. Twenty-three other states have altered their law to collect a cut of digital purchases.

Kelly included such a tax in her 2020 budget proposal, estimating it would bring in over $26 million to the state's coffers. But Republicans did not include the item in the final version of the state budget.

Burghart said Kansas law remained out of line with how residents are spending their money in 2020. While he hasn't discussed the matter with Kelly, he argued it should continue to be a priority for lawmakers.

"It shouldn't matter how a product is delivered as to whether it should be included in the tax space," he said. "Our base is going to continue to shrink as technology allows different modes of delivery, and we need to recognize that."

There is another loophole that Burghart is pushing to close, as well. Due to gaps in state law, there is no sales tax collected from out-of-state merchants such as eBay, Amazon and Etsy.

Those "marketplace facilitators" conduct a transaction on behalf of a third-party vendor and have not been included in efforts to get online retailers to pay the same taxes that their brick-and-mortar counterparts do.

"We may be one of three states that doesn't have a marketplace facilitator provision," Burghart said. "And there are significant dollars associated with that." 

While this may seem to be a Byzantine distinction hidden in the annals of the state’s tax code, the state says it is leaving at least $30 million a year in revenue on the table, while also putting physical businesses at a disadvantage. It has been nixed in the past as part of larger tax bills due to other, more controversial provisions.

But Burghart's main focus is on the fast-approaching tax season, with the department gearing up to start receiving tax returns in late January. 

Many of the employees charged with handling tax issues have been working from home but were still able to process over $4 billion in taxes and fees.

Efficiency, Burghart said, has actually increased, even with more employees working remotely.

"We're not going to have to adjust much at all going forward into the next tax filing season," he said.

There does not appear to be any plans to move the income tax filing deadline, which shifted to July in 2020 at both the state and federal level in an effort to buy residents more time to pay their bills.

But Burghart acknowledged that the financial reality for many Kansans remains difficult due to the pandemic. He pledged that the department would work with individuals, whether via payment plans or some other means, to minimize any monetary pain.

"We will continue to work with those individuals to lessen that burden," Burghart said. "They're not going to have to deal with a very harsh Department of Revenue. That's not going to be the case."