Turning Kansas’ tax-cut nightmare into a fairy tale
Time for a history lesson, one that can be condensed into four headlines I found while doing online research:
From the Lawrence Journal-World in December 2014: Brownback announces $280 million in allotment cuts to fill budget shortfall.
From NPR in February 2015: Kansas will cut education funding to help close budget gap.
From the Wichita Eagle in November 2016: State facing $350 million budget gap.
From the Topeka Capital-Journal in March 2017: Kansas, facing huge budget deficits, wonders what to do next.
Recalling the chronic budget crises works as a reality check on campaign claims we’re now hearing. Such checks are needed as some Republicans and Koch-funded political groups claim huge tax cuts pushed through by Gov. Sam Brownback and the Legislature in 2012 were working until lawmakers raised taxes in 2017.
The facts don’t agree. Even with cuts to education, highways, health care and every other program lawmakers could find, the state couldn’t balance its budgets. Revenues from taxes continued to fall short of projections – month after month and year after year.
The scenario was nothing like the one painted when Brownback and Kansas lawmakers passed the income tax cuts.
The cuts exempted thousands of businesses, farms and others from paying any state income taxes and reduced rates for the rest of us. Brownback promised the cuts would spark economic revival in Kansas. In a campaign script being used again now, he said businesses would rush to the state and create thousands of new jobs. The state’s economy would grow so big and fast that the tax cuts would pay for themselves, the governor vowed.
That didn’t happen.
Instead, Kansas’ economy lagged behind the nation, ranking near the bottom in economic expansion and job growth.
And the state faced huge budget holes, which lawmakers tried to fill by borrowing billions and in 2015 by raising the most regressive of Kansas’ taxes – the sales tax. But budget shortfalls continued.
Finally, in 2017, Democrat and Republican lawmakers cooperated to roll back some of the income tax cuts – overriding Brownback’s veto. It wasn’t a complete solution, but legislators restored sanity to state tax policy.
Now faux conservatives want us to believe that voting for a tax policy that pays for the state’s roads, schools and state hospitals is a radical concept.
They point to President Donald Trump’s tax cuts as evidence that tax cuts can boost the economy. There’s some truth to that argument – and some caveats.
The first caveat has to do with the size of the tax. The higher the original tax rate, the more potential incentive exists if it is reduced. The state’s tax rate was never high enough to create much incentive.
Second, the design of the tax cut matters. Simply eliminating taxes for thousands of existing businesses and residents doesn’t encourage investment. Policies that include incentives to invest – new buildings, new jobs and research, for example – are more likely to boost the economy.
Third, the federal government doesn’t have to balance its budget. Kansas does.
The federal deficit for the fiscal year that ended Sept. 30 totaled $779 billion, the highest figure since 2012, according to the U.S. Treasury. Economists say Trump’s tax cuts are a major factor in the huge increase, and that deficits will continue to soar. Treasury officials say the deficit will exceed $1 trillion this fiscal year. That’s the annual deficit, not the cumulative debt, which is also growing at an alarming rate.
Republicans who railed against deficits during the Obama administration now cheerfully advocate bigger ones. The U.S. House last month voted for even more tax cuts. The move – made before House members went home to campaign for their jobs – would add another $600 billion to the nation’s debt over the next 10 years, according to a piece in the Washington Post.
Kansans shouldn’t be fooled again. Our schools, our roads, our universities and our health care have suffered from politicians’ reckless policies.
Unlike Washington, Kansas can’t just run up bigger deficits. Instead, we need to elect officials who choose fair and equitable tax policy over political favoritism disguised as economic policy.