Liberals, and even some neo-cons, have been busy spreading the myth that the Kansas tax cuts have "failed," that the tax cuts caused a huge deficit, and that the tax cuts did not lead to good economic growth. Liberals are cheering the fact that a few months ago the Kansas legislature, by a narrow vote, repealed a good chunk of Governor Sam Brownback's tax cuts. Alan Cobb gives us the other side of the story:
In a nutshell, here is what happened:
* The tax cuts were followed by good overall economic growth.
* The tax cuts were followed by five years of record business creation in Kansas.
* The tax cuts were followed by several other positive economic developments, such as a historic reduction in the child poverty rate.
* The legislature failed to eliminate politically popular exemptions and deductions, making the initial revenue drop more severe than the governor planned.
* The legislature failed to reduce spending to the level of revenue.
* Indeed, state spending increased every year except 2013, where expenditures decreased a modest 3 percent from 2012. It should therefore not come as a surprise that the state faced large budget gaps year after year.
* Eventually, rather than cut spending to the level of revenue, some newly elected moderate Republicans teamed up with the Democrats a few months ago and narrowly overrode Brownback's veto and repealed much of Brownback's tax cuts.
Jonathan Williams and Joel Griffith of the American Legislative Exchange Council:
Sources for further reading:
Libs knock Trump's tax plan, but this gov proves tax cuts work
The Kansas Tax Cuts Are Not to Blame for Revenue Woes
Nothing the Matter with Kansas' Tax Policy
Debunking The Myth Of Tax Avoidance In Kansas
Despite what the media is telling you, tax cuts really do boost economic growth in the states
The state legislature’s recent decision to raise income taxes by $1.2 billion will hurt every working Kansan and small business. It will damage the long-term trajectory of our state. It will pummel pocketbooks and discourage job creators. Additionally, the retroactive nature of these regressive taxes will cause a great deal of pain, crippling our state’s economy and putting us at a competitive disadvantage.
Kansans deserve to keep more of their own money. The 2012 income tax cuts did just that. Families had more in their pockets to pay off debt, save for their children’s college or invest in a new home. Business owners were able to reinvest their earnings into their enterprise and local communities.
Kansas saw strong results. Unemployment is down to 3.7%, the lowest in 16 years. The state set a record for new businesses every year since cutting income taxes. The small businesses the tax cuts targeted created 98% of new private sector jobs in our state. Despite these strong results, many blamed our budget challenges on these cuts, ignoring the substantial downturn in global agriculture and energy markets.
Refusing to acknowledge the data, legislators pledge to fix the perceived problem of the “small business tax cut.” But when the time came to cast their votes, they voted for broad-based tax increases on all Kansas workers. Kansas will now have a higher top marginal individual income tax rate than Massachusetts. (Kansas tax cuts produced strong results)
Kansans deserve to keep more of their own money. The 2012 income tax cuts did just that. Families had more in their pockets to pay off debt, save for their children’s college or invest in a new home. Business owners were able to reinvest their earnings into their enterprise and local communities.
Kansas saw strong results. Unemployment is down to 3.7%, the lowest in 16 years. The state set a record for new businesses every year since cutting income taxes. The small businesses the tax cuts targeted created 98% of new private sector jobs in our state. Despite these strong results, many blamed our budget challenges on these cuts, ignoring the substantial downturn in global agriculture and energy markets.
Refusing to acknowledge the data, legislators pledge to fix the perceived problem of the “small business tax cut.” But when the time came to cast their votes, they voted for broad-based tax increases on all Kansas workers. Kansas will now have a higher top marginal individual income tax rate than Massachusetts. (Kansas tax cuts produced strong results)
In a nutshell, here is what happened:
* The tax cuts were followed by good overall economic growth.
* The tax cuts were followed by five years of record business creation in Kansas.
* The tax cuts were followed by several other positive economic developments, such as a historic reduction in the child poverty rate.
* The legislature failed to eliminate politically popular exemptions and deductions, making the initial revenue drop more severe than the governor planned.
* The legislature failed to reduce spending to the level of revenue.
* Indeed, state spending increased every year except 2013, where expenditures decreased a modest 3 percent from 2012. It should therefore not come as a surprise that the state faced large budget gaps year after year.
* Eventually, rather than cut spending to the level of revenue, some newly elected moderate Republicans teamed up with the Democrats a few months ago and narrowly overrode Brownback's veto and repealed much of Brownback's tax cuts.
Jonathan Williams and Joel Griffith of the American Legislative Exchange Council:
For years, the tax and spend crowd has desperately tried to pin Kansas’ economic difficulties on tax cuts in an attempt to deter tax reformers in the other 49 states and Washington, D.C. The data indicate otherwise. While the detractors are correct that the nation does have much to learn from the Kansas tax reforms, the real lessons are far different than those misleadingly promoted by the naysayers. An overwhelming majority of the academic evidence confirms, lower taxes – especially lower tax rates on business and personal income – indeed boost economic growth. Failure to properly prioritize spending or tackle government inefficiency continues to impact Kansas finances.
Perhaps the most important complexity to keep in mind is the Kansas tax reform plan was never fully implemented as intended. Many political compromises gave us a patchwork of fiscal policy that Kansas taxpayers currently face. Tax rates were lowered, but spending was not. Oil and agriculture, sectors that disproportionally affect the Kansas economy, faced a major downturn. The recommendations of outside experts to enhance government efficiency and produce massive budget savings were ignored. Then taxes were raised, and spending was increased, in a significant way. Some of the tax increases came in the form of broad-based retail sales taxes and income taxes, while others were discriminatory taxes on consumers of specific products such as cigarettes. . . .
Myth: Tax cuts created Kansas’ prolonged budget crises.
Reality: Over the years, politicians created a budget failure by refusing to match the tax cuts with meaningful spending control or broadening of the tax base. General Fund spending from 1995 through 2017 rose approximately 55 percent, adjusted for inflation, and a whopping 89 percent in current dollars. Population increased just 12 percent from 1995-2017. In other words, for every one percent in population growth, spending increased by nearly five percent in real terms. Since 2012, General Fund spending has increased by more than four percent adjusted for inflation since 2012. If General Fund spending growth had been held to the rate of inflation throughout this period, FY 2017 spending would be $1.12 billion less, dwarfing the predicted deficit. (Distinguishing Myth from Reality: The Kansas Tax Reform Effort - American Legislative Exchange Council)
Perhaps the most important complexity to keep in mind is the Kansas tax reform plan was never fully implemented as intended. Many political compromises gave us a patchwork of fiscal policy that Kansas taxpayers currently face. Tax rates were lowered, but spending was not. Oil and agriculture, sectors that disproportionally affect the Kansas economy, faced a major downturn. The recommendations of outside experts to enhance government efficiency and produce massive budget savings were ignored. Then taxes were raised, and spending was increased, in a significant way. Some of the tax increases came in the form of broad-based retail sales taxes and income taxes, while others were discriminatory taxes on consumers of specific products such as cigarettes. . . .
Myth: Tax cuts created Kansas’ prolonged budget crises.
Reality: Over the years, politicians created a budget failure by refusing to match the tax cuts with meaningful spending control or broadening of the tax base. General Fund spending from 1995 through 2017 rose approximately 55 percent, adjusted for inflation, and a whopping 89 percent in current dollars. Population increased just 12 percent from 1995-2017. In other words, for every one percent in population growth, spending increased by nearly five percent in real terms. Since 2012, General Fund spending has increased by more than four percent adjusted for inflation since 2012. If General Fund spending growth had been held to the rate of inflation throughout this period, FY 2017 spending would be $1.12 billion less, dwarfing the predicted deficit. (Distinguishing Myth from Reality: The Kansas Tax Reform Effort - American Legislative Exchange Council)
Sources for further reading:
Libs knock Trump's tax plan, but this gov proves tax cuts work
The Kansas Tax Cuts Are Not to Blame for Revenue Woes
Nothing the Matter with Kansas' Tax Policy
Debunking The Myth Of Tax Avoidance In Kansas
Despite what the media is telling you, tax cuts really do boost economic growth in the states
