No serious person now believes the 2012 Kansas tax cuts have performed as promised.
By virtually every measure — job creation, personal income, growth — Kansas’ economic performance still trails the U.S. as a whole. Even the state’s relatively low unemployment rate, 4.4 percent, is higher than the rate in 16 other states, including neighboring states Colorado, Nebraska, Iowa and Minnesota, which raised its taxes and the minimum wage.
Gov. Sam Brownback’s “shot of adrenaline” never took place, and never will.
Even so, Friday’s announcement of a two-year, $354 million revenue shortfall in Kansas is particularly scary. The red ink now suggests the state faces an economic crisis only indirectly related to the tax cuts, a fundamental challenge that may take decades to address.
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Remember, last June, the legislature passed and the governor signed the biggest tax increase in Kansas history. Friday’s lower revenue projections are actually based on higher taxes on sales and tobacco, as well as changes to deductions and credits that may shock Kansans when they file their income tax returns next spring.
Those clamoring for repeal of the Brownback tax cuts miss this important point. In essence, the Brownback tax cuts have been repealed.
The state’s tax burden has dramatically shifted — from the wealthy to the middle class and poor — but the aggregate amount of state revenue is, or should be, roughly the same as it would have been had the income tax cuts never taken place.
Yet the state is taking in far less than it thought it would. That sends a message.
The state’s major industries are struggling. Wichita is still dealing with the collapse of aviation jobs. A depressed farm economy and lower prices for oil and natural gas have damaged revenue. Retail sales have cratered. Sprint may lay off more workers. Public sector jobs have vanished.
Republicans blame the national economy for this, which is ridiculous. The national economy is outperforming the Kansas economy by a wide margin.
The state’s deep financial problems are a serious warning that its economy is too heavily based on a 20th century model: heavy manufacturing, agriculture, fossil fuel energy, retail sales, government. All of those sectors are under enormous, transformative pressure — a challenge Kansas seems unprepared to meet.
There are, potentially, alternatives. Health care delivery and data remain the biggest growth sectors of the national economy, yet hospitals are closing in Kansas. Digital research and software design alternatives. Accounting and business management. Bioscience.
Remaking a state’s economy is hard work. It requires changes in education, training, infrastructure and incentives. It also requires vision: What will the 21st century workplace look like? How can we prepare residents for a lifetime of changing occupations? What can we do to help an aging population? Do we need more highways or fewer? Are we teaching the right things? What resources do we have?
What kind of state do we want?
Kansas lawmakers have spent the last three years ignoring those questions. Instead, they’ve relied on cutting taxes, hoping the state’s businesses would reinvest and the economy would bloom.
It’s now clear that strategy was in error. Kansas didn’t need an artificial shot of adrenaline — it needed the natural kind, the adrenaline that comes from hard work and smart choices. It didn’t choose that path, and it will probably pay the price for decades to come.