Next week, Kansas lawmakers will once again try to figure out how to cover a massive shortfall in the state’s budget.
We hope President Donald Trump will be in the gallery, taking notes.
That’s because the president’s tax plan, unveiled by the White House Wednesday, strongly resembles the disastrous tax plan passed in Kansas in 2012.
Trump wants to consolidate individual tax brackets and lower the top rate. He would eliminate some deductions and, most crucially, dramatically reduce taxes for business owners, including millions of people who own businesses but pay taxes on their profits as individuals.
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Kansas Gov. Sam Brownback’s 2012 tax reform blueprint was quite similar, and we know why. The same worn-out supply-side “experts” helped write both proposals.
Still, the president, the Congress and millions of Americans may be somewhat unfamiliar with the outcome of what Gov. Sam Brownback once called a “real live experiment” in tax policy.
No problem. We’re happy to offer some of the lessons we’ve learned first-hand over the last five years:
▪ The economy won’t grow at the rate you think. Brownback promised his tax cuts would provide a “shot of adrenaline” to the Kansas economy.
It never happened. Job growth in Kansas has lagged behind peer states, neighboring states and even some states that raised taxes.
A recently published academic paper suggests why: Kansans used the small business exemption to avoid taxes, not to add workers.
The governor and his allies blame slow growth on unanticipated slumps in the farming and energy sectors. That merely proves tax cuts are usually less significant than other macro-economic trends.
The American economy is changing dramatically. Health care jobs are up, while retail jobs have collapsed. Coal mining isn’t coming back.
Giving companies a huge tax break won’t change that.
▪ The deficit will increase. Remember when Republicans worried about the federal deficit? Good times.
Those worries have apparently vanished. That’s less important in D.C. than in Kansas — Washington can deficit spend, Kansas can’t — but, contra former Vice President Dick Cheney, deficits still matter.
And the White House can’t make that reality go away, no matter how many dynamic-scoring magic asterisks it uses. Kansas passed the biggest tax increase in state history in 2015 and is still $900 million short over the next two years.
▪ The business tax cuts will be unpopular. Kansas is one of the most Republican states in the nation, yet its GOP governor is a political outcast. Why?
The tax cut drama is one explanation. Kansans have grown tired of credit rating cuts, crowded schools, one-time transfers and budget crises.
But something else is at work. Kansans resent the fact that thousands of business owners pay no state income taxes at all, while working people do. In fact, those working people have seen taxes on food rise dramatically.
Trump’s huge business tax cuts, coupled with smaller reductions for individuals, will anger low- and middle-income Americans.
And ending the federal estate tax and the alternative minimum tax while eliminating federal deductions for health expenses and state and local taxes will make it worse.
We do not oppose tax reform. Paying federal taxes is too complicated and too distorted by tax breaks for special interests. Taxes at all levels should be simple, low, broad and fair.
But the president isn’t just proposing tax reform. He also wants a trickle-down tax cut for the wealthy. Kansans know how this story ends.