The recent drop in oil prices has translated into fewer tax dollars for the state of Kansas. Oil producers pay state taxes based on the price of oil when it’s pumped. But the price of crude oil is now well below the number used by state economists when they were making revenue projections in November.
Chris Courtwright, with the Kansas Legislative Research Department, told lawmakers today (TUE) that it’s not all bad news. Spending less on gas means consumers have more money to spend on other things.
“There’s more money in their pockets that might be spent on goods and services that are subject to the sales tax. So while there’s bad news on severance tax receipts, maybe there will be good news on sales tax receipts,” says Courtwright.
Courtwright says oil and gas production in Kansas also hasn’t increased as much as projected. He says the impact on oil production tax collections could be tens of millions of dollars, but the total won’t be fully known for several months.
The recent drop in oil prices is translating into fewer tax dollars collected by the state of Kansas. That comes as lawmakers are already facing budget deficits reaching hundreds of millions of dollars. As KPR’s Stephen Koranda reports, oil producers pay a so-called severance tax based on the price of crude oil.
When economists met in November to create a new revenue estimate for Kansas, they used a crude oil price of $80 per barrel.
“Eighty dollars a barrel? If we were doing that today, why you’d laugh us out of the room,” says Chris Courtwright, with the Kansas Legislative Research Department
He says tax collections will be down because oil is now nearing $40 a barrel.
But he told a legislative committee that consumers now have more money to spend on things other than gas, which could help sales tax collections.
“Let’s keep our fingers crossed that there’s going to be some good news on the sales tax front,” says Courtwright.
Courtwright says oil-related tax collections could be down by tens of millions of dollars, but we won’t know for several months.