With each passing month, it seems Gov. Sam Brownback’s “real live tax experiment” gets ridiculed more and more. While I can certainly understand some of the concern, it baffles me how unreported the positive aspects of his plan are. Before I delve too deeply into Brownback’s “tax experiment” I would like to provide some basis as to why he decided to cut taxes.
A significant problem Kansas faces is population loss. In fact, 77 of Kansas’ 105 counties lost population in the last decade. Moreover, 28 counties since 1990 have not shown any population gain. Additionally, Kansas has had 5 percent to 10 percent less population growth in the past two decennial census reports than the nation on average. And in 1990, only nine Kansas counties showed population increases on par or greater than the national average.
Therefore, when Brownback took office, he knew he had to reverse Kansas’ lagging population growth. He looked to hard data, finding low-tax and tax-cutting states have a greater possibility of experiencing economic and population growth than states with high taxes. In fact, economist Dan Mitchell points out between 2000 and 2009, the non-income tax states gained in domestic U.S. population by 5.5 percent, while every other state lost by 1.3 percent entirely.
With all of this in mind, Brownback presented a tax plan in January 2012 that focused on slashing rates, eradicating itemized deductions, and removing income taxes on all small businesses (this includes farmers). Furthermore, the governor recognized that lower taxes would lead to lower revenues, so he built up $709 million in reserves for the state by the end of the fiscal year of 2013.
Unsurprisingly, revenues fell the first full year of the tax cuts; however, were the governor’s tax cuts the only reason? According to economist Stephen Moore and Congressional Budget Office data, because of capital gains shifts resulting from the expiration of the Bush tax cuts, Kansas lost $147 million in tax revenue. Moreover, another $103 million in loss resulted from an accounting error by the Kansas Division of the Budget. Therefore, Brownback’s cuts amounted for less than $100 million in revenue loss, which only made up about 1.5 percent of Kansas revenue collections for that year. That percentage was on par with most states, which usually face a loss of 2 percent or less each year in revenue collections. Therefore, in order to make up this lost revenue, Brownback had to pull money from the reserves he had saved for other years.
Revenues have also fallen because the Kansas Legislature refuses to cut the budget enough. According to the KDB, the state’s annual budget has grown by more than 30 percent in the last 10 years. Frankly, this is unsustainable, for Kansas’ population only grew by 6.1 percent during that period. Every state has education and services to fund — some just do a more efficient job of funding them with less money. And while Brownback has done much budget reform, more is needed. Even so, further data from the KDB provides that, while income tax revenues greatly varied in 2014, they graphically increased after hitting a low point in May; likewise, state general fund receipt collections for the next three years show positive growth as well.
In order for people to further understand the effects of the 2012 tax cuts, they must stop concluding budget deficits are a sign of economic turmoil. In fact, with that logic, the U.S. economy would always be in distress. Think about it, when was the last time the U.S. did not have a national deficit? I do not mean to excuse Kansas’ budget deficit because it must be fixed, and it will be, because the state is required by law to have a balanced budget.
As for this year’s revenue shortfalls, I would agree they are largely the result of the governor’s tax cuts. So then should the tax cuts be pulled back? Have they even fixed anything? On the population side it is too soon to see concrete results; nonetheless, the tax cuts have had a positive effect on the Kansas economy:
Creighton University economist Ernie Gross, who compiles the Purchasing Economy Survey Report, which is a monthly report on the mid-American states’ economies, concluded in October that Kansas’s 2012 tax cuts resulted in its economy growing faster and performing better than both its neighboring states and the U.S. as a whole. Also, private-job growth in Kansas beat out Nebraska by 167 percent, Iowa by 105 percent and Oklahoma by 61 percent. Our private economy also grew twice as fast as Missouri, and per capita, personal disposable income increased by 10.8 percent during Brownback’s first term.
Kansas also has the 11th lowest unemployment rate in the nation, and the Kansas Department of Labor recently recorded the highest number of Kansans working in the state’s history — 1,436,564 people, or 76 percent of residents ages 15 to 64 years old. Private-sector job growth in 2014 reached 1.9 percent, which was the fastest rate of growth in the state since 2007. Before 2007, the state had not seen this kind of growth since 1998. Furthermore, a record number of businesses started in the state in 2014.
Tax cuts do not have supernatural abilities, and they are not guaranteed to work; however, long-term data shows that, if given ample time, they most often do work much better than tax hikes. As you can see, even after just two years, Brownback’s cuts have positively influenced the economy. In the end, you can pump as much money as you want into education, healthcare, and the like, but if you do not have any people to use those services, what is the point? This is precisely the reason I support tax cuts and responsible spending, which ultimately will result in more tax-paying residents in Kansas.