Future of Kansas
Published on -5/23/2012, 8:57 AM
Kansas is about to embark on a new path. Gov. Sam Brownback and his supporters believe it will lead to prosperity; critics believe it to be the road to ruin.
By signing into law a lower sales tax and massive income tax cuts Tuesday, neither side will have to wait long to discover the reality. Beginning with fiscal year 2013, which starts July 1, tax relief will total a projected $231 million. The amount will increase annually until it reaches $934 million in six years.
"Now is the time to grow our economy, not state government, and that's what this tax cut will do," the governor proclaimed at the bill-signing ceremony. "(This) legislation will create tens of thousands of new jobs and help make Kansas the best place in America to start and grow a small business."
The legislation also will result in tax increases for Kansans making less than $20,000 a year, according to the Washington-based Institute on Taxation and Economic Policy. Those at the low end of the economic spectrum are the only ones facing an increase, which is why Brownback isn't worried. He believes the tax decreases on everybody else will result in more jobs.
Citing former President Ronald Reagan's success with growing the private sector by cutting taxes, Brownback is steadfast the same will happen in Kansas. The governor projects the new law will result in 22,900 new jobs, give $2 billion more in disposable income to Kansans and increase population by 35,740.
Brownback's optimistic assumptions are not supported by serious research. But they are supported by the Kansas Chamber of Commerce, Americans for Prosperity, the Club for Growth, the Kansas Policy Institute and former Reagan economic adviser Arthur Laffer. That was enough to push the tax cuts through the conservative-dominated Legislature.
"My faith is in the people of Kansas, not the government's ability to tax and redistribute," Brownback said.
His words echoed Reagan's infamous campaign slogan: "Government is not the solution to our problem, government is the problem."
Will Brownback be able to emulate Reagan's track record? The former president not only passed the largest tax cut in U.S. history, but also encouraged private initiative and enterprise, reduced government regulations, and lessened the federal government's role in solving social problems.
There were downsides to the supply-side approach. According to documents in the Ronald Reagan Presidential Library: "The economic gains, however, came at a cost of a record annual deficit and a ballooning national debt." Reagan also "was not popular with some minority groups, particularly blacks, many of whom did not benefit from the economic prosperity."
Brownback will not have the luxury of either deficit-spending or debt. And the nonpartisan Kansas legislative research staff shows a budget deficit of $2.5 billion by 2018.
So if Brownback's assumptions are not borne out, expenses will need to be cut drastically in the state's general fund of $6 billion. Education, public safety, social services, transportation, state prisons, health care programs and higher education all would need to take close to a 50-percent reduction in funding. The only way to avoid that scenario would be to boost property and sales taxes to make up the difference. Neither case sounds like "the best place in America to start and grow a small business."
In the long run, we believe Brownback's tax reforms will mimic Reagan's. The only beneficiaries will be the wealthy. Everybody else will pick up the tab and suffer the consequences.
Editorial by Patrick Lowry