Dave Helling

Dave Helling: Five lessons from five years of cutting taxes in Kansas

Congress is considering a national tax plan that’s remarkably similar to the one that Kansas just repealed, and other states are pondering their own tax schemes, using Kansas as a template — or a cautionary tale. So understanding what happened under Gov. Sam Brownback is essential.
Congress is considering a national tax plan that’s remarkably similar to the one that Kansas just repealed, and other states are pondering their own tax schemes, using Kansas as a template — or a cautionary tale. So understanding what happened under Gov. Sam Brownback is essential. File photo

The five-year fight over the Kansas tax cuts has ended. The pay-your-bills caucus has defeated the shot-of-adrenaline crowd.

What lessons have we learned?

It’s an important question. Congress is considering a national tax plan that’s remarkably similar to the one Kansas just repealed. Politicians in other states are pondering their own tax schemes, using Kansas as a template — or a cautionary tale.

So understanding what happened here under Gov. Sam Brownback is essential. Yet that understanding may be clouded by a series of myths and misunderstandings already swarming around the Kansas tax experiment like mosquitoes at the lake.

So let’s clear the deck. Here are five important things Kansans now know:

1. The tax cuts failed on their own terms, not because Kansas failed to cut spending.

Revisionists claim the state’s red ink can be blamed on excessive spending, not the tax cuts.

But Brownback never asked for spending cuts to pay for his tax reductions. And general fund spending since 2013 has increased a measly 1 percent a year, far below the rate of spending increases under other governors.

The entire premise of supply-side tax cuts is that an explosion of economic activity will make spending reductions unnecessary.

In Kansas, of course, the reverse proved true: Spending reductions were needed because of dramatic drops in state revenue.

A new study suggests those spending reductions actually worked against the stimulus of the tax cuts, explaining why Kansas has lagged behind peer states that didn’t cut taxes.

2. The tax cuts didn’t fail because of problems in the oil and agriculture industries.

It’s true both industries have slumped in recent years. But farm income hit a record high in 2013 — the first year of the tax cuts — and oil exceeded $100 a barrel.

Yet Kansas tax revenue fell by more than 10 percent from June of 2013 to June 2014.

This is a key point, never acknowledged by the tax-cutters: The Kansas economy doesn’t exist in isolation, separate from national trends. Reducing taxes is a poor stimulus on a state level.

3. The tax cuts didn’t fail because they ran out of time.

Supporters of the Brownback tax reductions repeatedly asked for patience — the promised boost to the state’s economy would eventually take hold.

But the governor never said it would take five years or more for the state to respond to his adrenaline injection. Had he made that argument, lawmakers would have almost certainly rejected the plan in 2012.

Five years is far too long for any state to wait for a stimulus program to work.

4. Tax fairness is as important as tax rates.

Exempting small business pass-through income from state taxes struck Kansans as unfair. Lawyers got a tax break; their clerks didn’t.

Raising sales taxes on food also offended many Kansans and gave those in border counties a reason to shop in other states.

5. It wasn’t the media’s fault.

Virtually every newspaper in the state has hammered the tax experiment — at the invitation of Brownback, who repeatedly invited journalists to measure the impact of the tax cuts.

That’s what we’ve done.

Newspaper editorials didn’t cause the revenue shortfalls or the miscalculations. And they weren’t the reason Kansans turned against the experiment.

The tax cuts were doomed when rating agencies began to downgrade the state’s credit. A credit downgrade is something Kansans understand.

Brownback’s stubbornness didn’t help. He still seems reluctant to admit the failure of the centerpiece of his administration’s approach to the Kansas economy.

The rest of Kansas appears less conflicted. Supply-side tax cuts are fool’s gold, their representatives said this month, destined to fail.

Perhaps the rest of the nation has now learned that lesson, too.

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