A Eulogy for the Kansas Tax Cuts
Let the legacy of the Kansas tax cuts be the widespread knowledge that tax cuts do not spur growth.
We are gathered here today in remembrance of the Kansas state tax cuts, which expired on Wednesday, after a protracted fight between the Kansas state legislature and Republican Governor Sam Brownback. Though its life was short, the Kansas tax cuts — “the cuts,” to friends — left a strong impression and will not soon be forgotten.
The cuts came roaring to life in 2012, when the Kansas state government slashed the state income tax rate by 25 percent and eliminated all taxes on pass-through businesses. With unprecedented pedigree, their grandfather, Arthur Laffer, predicted the cuts would usher in an unparalleled boon to the Kansas economy. But like Icarus, the cuts were too ambitious, too thirsty for revenue, and flew too close to the supply side sun.
From conception, the challenges were substantial: State receipts crashed immediately, erasing $700 million, or one quarter of the state budget. The cuts also encouraged income shifting, which expanded revenue loss: suddenly 200,000 projected pass-through entities claiming tax-free status turned into well over 300,000. Notable friend of the cuts, University Kansas Jayhawks basketball coach Bill Self was one of these.
With these signs of trouble, Governor Brownback took emergency action to save the cuts, increasing cigarette taxes by nearly two-thirds and raising the sales tax by 7 percentage points — a course of treatment favored by four out of five tax cut ideologues. But the procedure failed to counteract the cuts’ ill effects and, typical of regressive sales tax hikes, created complications of its own: Consumers were angered and the revenue generated was insufficient to close the growing budget shortfall. Schools closed, highway funds and public pensions were raided, all in hopes that the promised growth would come. Instead, Kansas’ economy expanded at just one-third the rate of the country as a whole.
The Kansas state legislature first voted to remove the cuts from life support in February 2017. Despite heroic efforts by the governor who bravely vetoed that reversal, the damage to the state economy proved too much, and the Republican legislature pushed the repeal through over the governor’s override.
The Kansas tax cuts were preceded in death by the Reagan and Bush tax cuts, and are survived by the unending tax cut ambitions of Republicans in Congress who ignore this prognosis on the prairie to their collective peril.
We wish that the lasting legacy of the Kansas tax cuts will be the widespread knowledge that tax cuts do not spur growth. In lieu of flowers, tax cuts’ family encourages all who enjoy roads, clean drinking water and having both a military and functional education system to pay their fair share.
Originally published at Roosevelt Institute.
