Kansas is in the middle of a budget brawl, and tax refunds may be on hold if it isn’t resolved pronto. From the Kansas City Star:
The Kansas Finance Council was to meet at 1 p.m. today to vote on whether to borrow $225 million from healthy state funds to cover expected payments to schools, state workers and taxpayers. The state did the same thing last December when it ran into a cash-flow problem.
But Republican leaders said they wouldn’t authorize the new loans until Sebelius, a Democrat, signs legislation designed to erase the state’s current year budget deficit. That bill, passed Thursday, cuts statewide school funding by $32 million and makes millions more in cuts to other state agencies.
State officials are scrambling right now to determine what the cash flow problem will mean. Budget director Duane Goossen said it’s likely to mean a delay in tax refunds, state employee pay, reimbursement to Medicaid providers and school districts.
The Kansas City Business Journal reports that the state has only $5 million in the till (versus a $6.5 billion annual budget) so they do indeed appear to be out of cash.
Now this showdown can be seen as politics as usual; budget brinksmanship is hardly unheard of in the US. But there are a couple of noteworthy threads here. One is the insistence on a balanced budget, which folks like Paul Krugman maintain is nuts in times like these (he worries that spending cuts at the state level will offset any federal fiscal stimulus).
But second is bringing refunds into the fray. This is potentially explosive. Cutting or freezing budgets usually hits specific groups: state employees, contractors who have the state as an important client. people who depend on certain programs. But a tax rebate cut hits a broad swathe of people. Even thought the amount at issue may often be small, it sticks in voters’ craws.
I have long thought it would take a lot to rouse Americans to action. We tend to complain but not do much. But if moves like this become more common, we might see a big shift in the collective attitude. Consider these remarks in the Star’s comment section:
donshapley is right it is not even their money it is ours. I personally recommend that everyone who is owed a refund change their withholdings to 9 on the W-4. It will reduce your withholdings. Not sure if it is true but a friend who did payroll told mw putting 10 triggered a red flag.
Now the key is you must be disciplined enough to put the additional money from each check in savings so you have it to pay when you come up owing taxes next year.
Think how the state would freak out if a third of the people who work did this……….would love to see the state have to wait until 4/15 to get the bulk of their money……….
And this via reader Marshall:
Why is it when the state is hurting and strapped for cash we are all just suppose to sit back and say, “it’s okay, just keep my refund until you are good and ready to send it to me”? however, if it were the other way around and I owe them then there is NO excuse for my lateness. Seems a bit double sided if you ask me. EVERYONE is hurting in today’s economy and I understand that the state isn’t any different…but it frustrates me that when the shoe is on the other foot then its okay for the government but not okay for the citizens. I think that the state should pay US interest on our refunds in the same amounts that we have to pay them when we are late!
And I suspect we are going to see more of this sort of thing, both suspension of refunds and citizens at least contemplating tax gaming, perhaps disobedience. But I also suspect the only thing that will focus the minds of the officialdom would be bona fide collective action, and Americans aren’t inclined towards that sort of behavior.