Brownback welcomes Trump tax proposal, while Kansas lawmakers are more hesitant

Kansans have heard this promise before.

Back in 2012, it came from Gov. Sam Brownback when he championed a tax cut policy as a remedy for the state, saying, “That’s a shot of adrenaline to the heart of this economy.”

This week, the same rhetoric of economic prosperity brought about by tax cuts came from President Donald Trump’s administration.

But while the Trump administration is touting tax cuts, Kansas is moving closer to ending the tax cuts long championed by Brownback.

“I would hope others learned from what happened in Kansas,” said Sen. Dinah Sykes, a Lenexa Republican. “They’re going to make their decisions, but it did not work in Kansas and I’m afraid it could be detrimental for our country.”

Rep. Steven Johnson, a leading Kansas Republican on tax matters, said he even planned to contact members of the state’s congressional delegation to caution them not to support Trump’s proposal.

“I encourage him to try things that are bold and different,” said Johnson, an Assaria Republican who leads the House Taxation Committee. “... I don’t think this is it.”

Although both Brownback and Trump’s plans promised economic growth, the particulars differ.

Economist Arthur Laffer, who advised former President Ronald Reagan on supply-side economic policies, has advised both Trump and Brownback on tax policy.

Laffer is known as “the father of supply-side economics.”

Brownback’s 2012 tax cuts slashed income tax rates and created an income tax exemption for the owners of limited liability companies and other pass-through businesses.

Since then, the state has faced budget shortfalls, dealt with cuts and seen a movement within Brownback’s own party to roll back his signature policy change.

Trump’s tax cuts would not follow the exact Kansas model but would be similar.

The New York Times reported Wednesday that the Trump administration has proposed cuts to both individual and corporate income tax rates, while also slashing the rate pass-through entities pay.

Steven Mnuchin, Trump’s treasury secretary, confirmed in a video posted Wednesday by CNN that under the proposal, the business tax would fall to 15 percent.

“This is going to be the biggest tax cut and the largest tax reform in the history of our country, and we are committed to seeing this through,” Mnuchin said in the video.

He then praised how the tax cut would help small businesses and the economy.

Brownback has made a similar argument about his own business tax cut as it has faced criticism from Democrats and Republicans alike.

Sen. Tom Holland, a Baldwin City Democrat, said a lesson could be taken from the “colossal disaster” in Kansas.

“I guess history, and the mistakes throughout history, repeat itself,” Holland said.

Private-sector employment has grown by 53,300 jobs since Brownback’s tax cuts took effect in January 2013.

Yet Kansas has lagged behind the nation by one measure of economic growth.

From the first quarter of 2013 to the third quarter of 2016, the nominal gross domestic product in Kansas grew by 7.4 percent, according to the Kansas Department of Labor.

Nationally, that same growth was 13.4 percent.

And since Brownback’s second term as governor, which began in 2015, the state has gained 19,600 private-sector jobs.

That’s far short of Brownback’s 2014 campaign goal to boost growth in the private sector by at least 50,000 jobs by the end of 2016 and by a total of 100,000 jobs by the end of his second term.

The state has also seen job growth of 0.3 percent in the last year, while Missouri had a 1.4 percent growth rate over that same period, according to seasonally adjusted data from the U.S. Bureau of Labor Statistics.

Kansas’ growth rate was the ninth lowest in the United States, according to the preliminary March data from the federal government.

Brownback has continued to defend the tax cuts even as pressure has mounted to repeal the move.

“I’m pleased see them put that plan forward,” Brownback said Wednesday about Trump’s proposal. “Because it will work, and it will stimulate small-business growth, and it will stimulate employment.”

A study from researchers at Indiana University and the University of South Carolina about Kansas’ tax exemption found evidence suggesting that responses to the policy “were overwhelmingly tax avoidance rather than real supply side responses.”

In other words, the primary effect of the policy was that taxpayers found ways to reclassify their income as pass-through in order to take advantage of the tax exemption, according to the study.

Brownback has already vetoed one bill this year that would have rolled back the tax cut for roughly 330,000 business owners and raised personal income tax rates.

But some Republicans and Democrats say they are still trying to bring the state back to a tax plan similar to the pre-2012 tax cut levels.

Other Republicans have resisted raising taxes.

Earlier this month, the governor signaled some willingness to leave the business tax exemption behind if lawmakers agreed to pass a bill with a single personal income tax rate.

That proposal failed, and lawmakers said this week they are prepared to renew a charge to pass a tax plan that raises income tax rates and ends the business tax exemption.

“I hope we don’t reinstate those taxes,” Brownback told reporters Wednesday. “I hope we go to a single-rate system that’s still a pro-growth tax system.”

This story was originally published April 26, 2017 at 6:12 PM with the headline "Brownback welcomes Trump tax proposal, while Kansas lawmakers are more hesitant."