Misadventures in Kansas

Forbes contributor Howard Gleckman has a wonderful take on the current fiscal situation in Kansas. It’s not so much a take as it is a simple statement of fact. The lead is brusque, accurate, and to the point:

Kansas Governor Sam Brownback and his state legislature have embarked on a wonderful natural experiment. Once again we are testing the question: Can tax cuts pay for themselves? The answer– yet again– is a resounding no.

And the stats:

In 2012, at Brownback’s urging, the legislature cut individual tax rates by 25 percent and repealed the tax on sole proprietorships and other “pass-through” businesses. It also increased the standard deduction (though it eliminated some individual credits as well).

In 2013, the legislature cut taxes again. It passed a measure to gradually lower rates even more over five years. By 2018, the top rate, which was 6.45 percent in 2012, will fall to 3.9 percent. It also partially restored some of the credits it eliminated in 2012. This time, it did raise some offsetting revenue for the first few years but far less than the statutory tax cuts. The Center on Budget & Policy Priorities wrote up a nice summary of all the tax changes.

So what happened after all those tax cuts? Revenues collapsed.

From June, 2013 to June, 2014, all Kansas tax revenue plunged by 11 percent. Individual income taxes fell from $2.9 billion to $2.2 billion and all income tax collections plummeted from $3.3 billion to $2.6 billion, a drop of more than 20 percent.

Bottom line:

Since the first round of tax cuts, job growth in Kansas has lagged the U.S. economy. So have personal incomes. While more small businesses were formed, many of them were merely individuals taking advantage of the newly tax-free status of those firms by redefining themselves as businesses.

The business boom predicted by tax cut advocates has not happened, and it certainly has not come remotely close to offsetting the static revenue loss from the legislated tax cuts.

Unfortunately this won’t be enough proof for a lot of people who regard cutting taxes as some sort of offering to the Reagan alter, but for those of us who enjoy analyzing the effectiveness of public policies, it’s good data.

(Hat tip: The Dish)

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