Topeka’s tax-cut disaster

The New York TimesJuly 14, 2014 

The following editorial appeared in the New York Times:

There was a windstorm of hasty excuses after Kansas reported that it took in $338 million less than expected in the 2014 fiscal year and would have to dip heavily into a reserve fund. Spending wasn’t cut enough, said conservatives. Too many rich people sold off stock in the previous year, state officials said. It’s the price of creating jobs, said Gov. Sam Brownback.

None of those reasons was correct. There was only one reason for the state’s plummeting revenues, and that was the spectacularly ill-advised income tax cuts that Brownback and his fellow Republicans engineered in 2012 and 2013. The cuts, which largely benefited the wealthy, cost the state 8 percent of the revenue it needs for schools and other government services. As the Center on Budget and Policy Priorities noted, that’s about the same as the effect of a midsize recession. Moody’s cut the state’s debt rating in April for the first time in at least 13 years, citing the cuts and a lack of confidence in the state’s fiscal management.

The 2012 cuts were among the largest ever enacted by a state, reducing the top tax bracket by 25 percent and eliminating all taxes on business profits that are reported on individual income returns. (No other state has ever eliminated all taxes on these pass-through businesses.) The cuts were arrogantly promoted by Brownback with the same disproven theory that Republicans have employed for decades: There will be no loss of revenue because of all the economic growth!

“Our new pro-growth tax policy will be like a shot of adrenaline into the heart of the Kansas economy,” he wrote in 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.”

But the growth didn’t show up. Kansas, in fact, was one of only five states to lose employment over the last six months, while the rest of the country was improving. It has been below the national average in job gains for the three and a half years Brownback has been in office. Average earnings in the state are down since 2012, and so is net growth in the number of registered businesses.

With less money to spend, Kansas is forced to chop away at its only hope for real economic expansion: investment in public schools and colleges. While most states began restoring education funding after the recession, Kansas has cut K-12 spending by 2 percent over the last two school years and higher education by 3 percent since 2012.

The evidence of failure is piling up around Brownback, whose re-election campaign is faltering because of his mistake. Yet he continues to cling to his magical ideology, pleading for more time. “It’s like going through surgery,” he told The Wall Street Journal last month. “It takes a while to heal and get growing afterwards.”

But it’s not clear the patient can recover from this surgery – the reserve fund, in fact, is likely to nearly run dry next year. As Kansas has clearly shown, states cannot cut their way to prosperity. They need to use every tool of government to nurture growth, and those tools require money.

The New York Times

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