Sunday, July 13, 2014

How Tea Party tax cuts are turning Kansas into a smoking ruin

"States considering deep tax cuts in hopes of sparking a surge of economic growth should look carefully at Kansas," ...  Yes, look carefully -- and run the other way!

By Michael Hiltzik

Sam Brownback, the Republican governor of Kansas, doesn't just believe in whistling past the graveyard--he's willing to stroll past it in full-throated song.

The graveyard is where the economy of Kansas has been buried since 2012, when Brownback and his Republican state legislature enacted a slew of deep tax cuts in a tea party-esque quest for economic "freedom."

Our new pro-growth tax policy will be like a shot of adrenaline into the heart of the Kansas economy.

"Our new pro-growth tax policy will be like a shot of adrenaline into the heart of the Kansas economy," he promised then. Brownback's tax consultant, the supply-side guru Art Laffer, promised Kansans that the cuts would pay for themselves in supercharged economic growth.

Instead, job growth in Kansas trails the nation. The state's rainy-day fund is dwindling to zero. Month after month, revenue comes in even lower than fiscal officials' most dire expectations.

In the rest of the country, school budgets are finally beginning to recover from the toll of the last recession; in Kansas, they're still falling. Healthcare, assistance for the poor, courts, and other state services are being eviscerated.

Who's benefiting? The rich, including those proud offspring of Wichita, Kan.: the Koch brothers.

Despite all this, Brownback resorted to an op-ed in the Wall Street Journal a few weeks ago to declare that "the early results are impressive." Among other statistics he cited, "In the past year, a record number of small businesses — more than 15,000 — were formed."

Yes, but as shown by the Center on Budget and Policy Priorities, a Washington economic think tank, 16,000 disappeared. And many of those businesses that Brownback crowed about were surely created to take advantage of one of the tax-cut quirks Brownback enacted. This is the elimination of all taxes on partnerships, sole proprietorships, and LLCs that pass through their tax liabilities to their owners. That allows everyone from freelancers and petty contractors to huge partnerships to avoid any state income tax at all, as long as they're organized as a certain type of "small business."

Brownback's policy, and his claims about its outcome, define the term "ideological" -- the imposition of preconceived notions on a contradictory reality.

The record of Kansas since 2012 shows the folly of such draconian cuts in revenue. It's one thing to enact targeted cuts in tax rates during an economic upswing, when such a policy can add fuel to job generation. It's quite another to do so blindly during a slump, when cuts in state services undermine efforts at recovery.

Brownback's tax policy came right out of the conservative playbook. His 2012 package cut the top two personal income tax rates from 6.45% (on income over $60,000) and 6.25% (on income between $30,000 and $60,000) to 4.9%. The rate on income under $30,000 was pared to 3% from 3.5%. Pass-through business income was made fully tax-exempt. The law increased the standard deduction, but also eliminated several tax credits that assisted the poor....

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