Tomfoolery in state finance figures
Published on -2/24/2013, 5:18 PM
"You can fool all the people some of the time, and some of the people all the time, but you cannot fool all the people all the time."
This quote, attributed to Abraham Lincoln, might not inspire a celebration of Presidents Day this past week but aptly characterizes the budgetary hijinks being played on Kansans in their state Capitol these days.
On Feb. 17, Dion Lefler of the Wichita Eagle reported Gov. Sam Brownback has been using phony numbers in talks throughout the state to justify state income tax cuts. State spending is going up, not down, as the governor alleges, and the governor's figures for past spending are off by $2 billion. Brownback also continues to spin the facts on education spending, according to the report.
Then, Feb. 18, Brownback's budget director, a former consultant to Americans for Prosperity who is reported to be a CPA, fell on his sword and apologized for giving the governor one of the faulty numbers.
Added to this flimflam, Brownback tax-cut guru Arthur Laffer recently was accused of cooking the books in his book, "Rich States, Poor States," the gospel used by Brownback and libertarian ideologues to justify elimination of state income taxes. Laffer's tax-cut dogma is published and actively promoted by the American Legislative Exchange Council, a tax-exempt vehicle used by U.S. businesses to influence the nation's governors and legislators on state policy, such as state income taxes. ALEC operates behind closed doors without disclosing what businesses pay for ALEC's "model legislation."
In their report, "Selling Snake Oil to the States," Iowa finance experts led by University of Iowa professor Peter Fisher document how Laffer selectively manipulates his data to reach the erroneous conclusion that elimination of income taxes will spur economic growth. They use Laffer's own numbers to show that his policy prescriptions, primarily lower taxes, when analyzed accurately, have no significant relationship to growth in state gross domestic product nor to growth in private sector employment. Further, Laffer's prescriptions actually show a negative correlation with growth in per capita income.
In other words, following the tax-cut gospel might contribute to lowering per capita income over time.
The Iowa researchers also take aim at another assertion, drawn again from Laffer and spouted repeatedly by Brownback that Kansans are leaving the state because of state income taxes. The Iowans conclude "that taxes have little to do with migration" and that Laffer's work is based on "unsupported assertions and spurious correlations."
This devastating critique of Laffer's pablum further challenges Brownback's belief that eliminating income taxes will be "a shot of adrenaline into the heart of the Kansas economy."
On top of this bunkum, Brownback has unleashed an array of budgetary trickery without parallel in state history, to plug the self-inflicted multi-billion-dollar hole created by ill-advised cuts in income tax rates and elimination of income taxes on businesses.
Brownback offers, for example, bait and switch. The bait? Cut and eliminate income taxes. The switch? Raise sales taxes by $262 million, raise income taxes by $231 million on homeowners who deduct mortgage interest and property taxes, and stiff the highway fund for another $245 million.
An additional litany of shell games, as in first you see it, then you don't, is proposed in the governor's budget as he retreats from adequate funding of core state services and abandonment of prior state commitments.
All this tomfoolery undermines the integrity of state finance as well as the credibility of Brownback as he pursues his all-in experiment to eliminate state income taxes based untested dogmas. Kansans should be wary of his claims, grip tightly onto their pocketbooks, and prepare to hold him and his legislative allies accountable for their taxing and spending shenanigans.
H. Edward Flentje is a professor Wichita State University.