Kansas offers tough lesson in tax-cut consequences

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Two years ago, Kansas Gov. Sam Brownback signed a bill that slashed that state’s top income tax rate by 24 percent and made smaller reductions for low-income filers. As the Center for Budget and Policy Priorities pointed out, the measure “fully exempted business profits that are ‘passed through’ from the firm to individual owners. No other state fully exempts these profits from taxation. [It also] raised the standard deduction and eliminated a number of tax credits, including ones that help low-income families, such as a rebate for sales taxes paid on food.”

Gov. Brownback insisted that those draconian cuts would launch the Kansas economy into earth orbit.

“Our new pro-growth tax policy will be like a shot of adrenaline into the heart of the Kansas economy,” he wrote in July 2012. “It will pave the way to the creation of tens of thousands of new jobs, bring tens of thousands of people to Kansas and help make our state the best place in America to start and grow a small business.”

After Brownback and the Republican-controlled Kansas Legislature passed the tax cuts, elected officials and interested parties in the other 49 states sat back, happy to let Kansans either pay the price or reap the dividends from their “risky tax scheme” (as Al Gore might have put it).

Tax cutters rejoiced, sure that their economic theories were about to be resoundingly confirmed — thanks to their courageous co-religionists in Kansas! Tax proponents — wait a minute, no sensible politician is a self-identified tax proponent, so let’s say proponents of balanced and equitable systems of taxation — sat back quietly and waited for the train wreck.

It came. The tax-cutting frenzy slashed state revenues drastically, but didn’t jump-start growth.

As the CBPP reported, “As other states recover from the recent recession, Kansas’ huge tax cuts have left that state’s schools and other public services stuck in the recession, and declining further — a serious threat to the state’s long-term economic vitality. Meanwhile, promises of immediate economic improvement have utterly failed.”

Kansas is falling back while everyone else is surging ahead. Average earnings there have declined since 2012, and that state was one of only five to lose jobs during the past six months. State tax revenues declined by $338 million from 2013 to 2014, prompting even more cutbacks in education and social programs.

The state’s fiscal position is so bad that Moody’s cut Kansas’ bond rating a notch in May (from Aa1 to Aa2), citing the state’s “sluggish” economy and reliance on one-time revenues to fund continuing operations.

And what did Gov. Sam say after Moody’s dropped the ax?

“What we are seeing today is the effect of tax increases implemented by the Obama administration that resulted in lower income tax payments and a depressed business environment,” Brownback said. “The failed economic policies of the Obama administration are affecting states throughout the nation. It is more important than ever that we continue our focus on growing jobs and creating a business-friendly environment that benefits Kansans.”

Yup, it’s all Obama’s fault!

Meanwhile, Obama unaccountably ignored Colorado when working so hard to create a “depressed business environment.” As the Colorado Department of State Planning and Budgeting cheerfully reported earlier this month: “After growing 4.4 percent this fiscal year, General Fund revenue is expected to grow 7.5 percent in FY 2014-15. Colorado’s economy continues to expand faster than many other states. The state has ingredients that are producing growth in today’s high-tech and complex economy, including a skilled workforce, entrepreneurial energy and innovation, diverse industries, and a rich ecosystem that connects ideas and resources.”

Tax cutters might argue that the 1991 Taxpayer’s Bill of Rights amendment laid the groundwork for our powerful economy — but they’d be wrong.

Colorado voters temporarily repealed elements of TABOR by supporting Referendum C in 2005, while the Front Range cities now leading Colorado’s vibrant economy (Denver, Boulder and Fort Collins) opted out of TABOR many years ago. Colorado Springs and Greeley still love TABOR, though.

So, Kansas, if you want to be like your conservative Colorado friends, here’s what you do: Strike oil (Greeley) or get a military academy, four major bases and two wars (Colorado Springs).

If you need any help, ask former Neumann Systems Group Inc. executive Todd Tiahrt, who quietly exited Neumann a few months ago. He has returned to Kansas — and he wants his old job back. You remember — he was one of those conservative Republicans in the House of Representatives from 1995 to 2011.

And Gov. Sam, guess what? If you want a great tax-cutter, I understand Douglas Bruce is available …

One Response to Kansas offers tough lesson in tax-cut consequences

  1. This reminds me of the city council cutting business fees without a plan to replace the revenue lost. Then again tax and spend is not the answer either.

    David H. Moore
    July 23, 2014 at 11:49 am