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Rushe writes: "Kansas has rejected the years-long tax-cutting experiment that brought its governor, Sam Brownback, to international attention and provided a model for the Trump administration's troubled tax plans."

Kansas governor Sam Brownback championed the cuts as a measure to spur growth - but they have left the state with a $1bn hole in its budget. (photo: Charlie Riedel/AP)
Kansas governor Sam Brownback championed the cuts as a measure to spur growth - but they have left the state with a $1bn hole in its budget. (photo: Charlie Riedel/AP)


Kansas Abandons Massive Tax Cuts That Provided Model for Trump's Plan

By Dominic Rushe, Associated Press

07 June 17


State legislature rolls back Republican governor’s ‘terrible experiment’

ansas has rejected the years-long tax-cutting experiment that brought its governor, Sam Brownback, to international attention and provided a model for the Trump administration’s troubled tax plans.

In a warning shot to the Trump administration, even Brownback’s fellow Republicans voted to override his veto of a bill to reverse many of the tax cuts he championed as a way to spur entrepreneurs and the economy, but which have left the state with a $1bn hole in its budget.

Starting in 2012, Brownback’s plan has been to “march to zero” – cutting taxes wherever possible in the belief that the money Kansans saved would flow into the wider economy and drive growth. The governor was advised by Arthur Laffer, the economist who inspired Ronald Reagan’s “trickle-down” economic theory. So radical was his plan that critics called Kansas “Brownbackistan”.

State Democrats and local critics were delighted that Brownback’s plan had finally hit the rocks after earlier attempts to overrule the governor’s veto had failed. Senator Tom Holland, of Baldwin City, cheered the end of “Sam’s march-to-zero madness”.

Judith Deedy, a mother of three from Johnson County who has campaigned against the cuts she blames for an escalating crisis in the state’s school system, said she was “delighted” by the news. “It just didn’t work. This was a terrible experiment that has left our state unable to do what it is supposed to do,” she said.

Brownback’s defeat means the state will end a tax cut for limited liability companies (LLCs) and so-called pass-through businesses – which meant independent business owners and farmers would pay no state tax on the bulk, if not all, of their income. That tax plan is similar to the pillar of Trump’s tax proposal. After it was brought in, the number of LLCs in Kansas leapt from 190,000 to over 300,000 and tax revenues plummeted, but the rate of jobs growth in Kansas has lagged that of its neighbors.

In an interview with the Guardian last month, Laffer defended his theories and said the problem was Brownback had not gone far enough. “When you put an atomic bomb on a place, it will materially change the place – but a cherry bomb probably won’t change the buildings or anything else,” he said.

Under the new tax plan, legislators expect to raise $1.2bn in new revenue over two years to close projected budget shortfalls totaling $889m through June 2019, and also provide additional funds for public schools.

The conservative Republican governor still touts the income tax cuts enacted in 2012 and 2013 as pro-growth policies. But voters soured last year on the governor’s policies, ousting two dozen of his allies from the legislature and giving more power to Democrats and moderate Republicans who then backed this year’s tax increase. The legislature’s action leaves his main political legacy in tatters.

“He still believes in this, and that’s OK. I don’t,” said senate majority leader Jim Denning, a conservative Kansas City-area Republican who supported the first round of tax cuts in 2012 but voted to override the veto. “I’ve made many, many bad decisions in my business career, as many bad as good, but I’ve always backed up and mopped up my mess. That’s what I’m doing now.”

Had the effort to override the veto failed, legislators would have had to start over on a new tax plan, with prospects of working into next week. Legislative leaders were waiting to finish work on the next state budget until tax issues were resolved, and Brownback’s administration had said that lawmakers need to pass a budget by 17 June for most state employees to continue getting paid after the new fiscal year begins in July.

“Let’s get our work done,” said representative Larry Hibbard, a moderate south-east Kansas Republican. “Let’s put this capitol in the rear-view mirror.”

Under the new tax laws, Kansas will return to having a third tax income tax rate for its wealthiest filers, something cuts in 2012 eliminated. The top rate will be 5.7%, as opposed to 4.6% now.

The governor endorsed less aggressive income tax increases and proposed raising cigarette and liquor taxes and annual filing fees for for-profit businesses. But his proposals wouldn’t have raised enough money to cover the spending increases for schools contemplated by lawmakers.

“We can and we must balance our budget without negatively harming Kansas families,” Brownback said in his short veto message Tuesday afternoon.

The tax increase was designed to also cover extra aid to the state’s 286 local public school districts because the state supreme court ruled in March that education funding is inadequate. The state spends about $4bn a year on its schools and lawmakers passed a plan Monday night to phase in a $293m increase in education funding over two years.

Brownback’s remaining legislative allies, like him, suggested that the tax increase will ruin the economy, and they argued that Kansas has done little to control its spending – a point many Democrats and GOP moderates disputed.

“This level of taxation is wholly unnecessary,” said senator Ty Masterson, a Wichita-area conservative Republican. “What we’re doing is fleecing our constituents.”

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+10 # elizabethblock 2017-06-07 21:53
OMG. High bloody time.
As James Thurber said, you can fool too many of the people too much of the time.
 
 
0 # Robbee 2017-06-09 09:42
Quoting elizabethblock:
OMG. High bloody time.
As James Thurber said, you can fool too many of the people too much of the time.

- trumpistan?
 
 
+12 # relegn 2017-06-08 05:51
The only "fleecing our constituents" that goes on is by the wealthy and their sycophants who wish to privatize government for their own profit.
 
 
-14 # lnason@umassd.edu 2017-06-08 06:20
Kansas' total state and local tax revenues were $23.4 billion in 2011, the year before the tax cuts were enacted. This year, in spite of tax cuts in some areas, Kansas' total state and local tax revenues are projected to be $26.6 billion -- that is a 14% increase in tax revenues over 6 years -- that is substantially more than inflation over the same period.

Kansas' problem is not a shortage of revenue. Kansas' problem is an uncontrolled growth in state and local government spending.

Lee Nason
New Bedford, Massachusetts
 
 
+10 # librarian1984 2017-06-08 09:44
Tell that to the schoolteachers.
 
 
+5 # Diane_Wilkinson_Trefethen_aka_tref 2017-06-08 15:25
Part I

Gotta luv how conservative Republicans spin facts into lies.

The issue is the validity of Arthur Laffer’s joke that cutting income taxes will stimulate the economy and job growth. His theory isn’t about what effect cutting building permit fees or property tax mil rates will have. So what does Lee Nason quote us? “Total state and local tax revenues”. I don’t know if she did that because she is ignorant or because she wants to deliberately mislead us.

In 2011, Kansas income tax revenue was $3.551 bn, 43.5% of state collections.[1] In 2016, it was $3.190 bn, 36.8%.[2] That is a DECREASE of $0.361 bn and that doesn’t EVEN include inflation.

What is particularly despicable about Kansas’ tax structure is that as it decreased taxes on people who were making money, it covered over 80% of those losses with increased taxes on people who were just trying to get by. So while Ind Inc Tax dropped from 39.7% of total collections to 31.8%, SALES AND USE TAX rose from 42.0% to 48.8%. Part of this was because since 2013, Kansas passed TWO sales tax increases.

Looking at TOTAL state collections really brings home the hypocrisy of this dastardly tax scheme. Although total revenues collected in 2011 were $8.168 bn and in 2016, $8.673 bn, an increase, if you subtract out the Sales & Use taxes, 2011 = $4.735 bn and 2016 = $4.438 bn, a decrease of $0.296 bn.

[1] http://ksrevenue.org/pdf/11arcomplete.pdf
[2] http://ksrevenue.org/pdf/ar16complete.pdf
 
 
+4 # Diane_Wilkinson_Trefethen_aka_tref 2017-06-08 15:26
Part II

If you think including the projections for 2017 might make the Laffer/Brownbac k theory look better, think again. According to the Kansas Division of the Budget and Kansas Legislative Research Department,* predicted revenues from ALL sources for 2017 are down from 2016. Projected revenues from inc tax AND sales & use taxes are down. Projections for 2018 are lower than for 2017 and for 2019 are lower than for 2018.

* http://www.budget.ks.gov/files/FY2018/CRE_Long_Memo_May2017.pdf
 
 
+2 # universlman 2017-06-08 16:03
Nonsense Lee

http://realprosperityks.com/goossen-income-tax-cuts-broke-kansas-budget/
 
 
+11 # MainStreetMentor 2017-06-08 07:34
If any Republicans at the federal level, (House/Senate legislators), are following this fiasco of Brownback’s, then they’d better take a very long, very hard look at what Trump is proposing – ‘cause it’s VERY similar to that of Brownback. If Trumps’ plan is implemented, America will be headed for a financial disaster which could make the Great Depression appear as a cake walk. As always, the only ones to financially survive will be the ultra-rich and the mega-wealthy. Republicans, in supporting Trump, are composing the music with which to march themselves and their party into … political oblivion.
 
 
+12 # librarian1984 2017-06-08 09:46
Unfortunately Republicans have already started shoveling, saying Brownback just didn't implement well -- he moved too fast or didn't go far enough, etc.

The GOP has made an art of existingin a state of denial.
 
 
+8 # Citizen Mike 2017-06-08 07:39
So here the conservative proposition has been tested in actual practice and proven false by experiment. So when will these tax-cutting crackpots finally shut up?
 
 
+12 # chrisconnolly 2017-06-08 08:45
This sort of tax plan has failed nearly one hundred times. This is the Disaster Capitalism the Milton Friedman school of economics has promoted around the world since Pinochet destroyed Chili with it. This is corporate greed sold as economic growth. Cut all government spending on social programs like schools and healthcare, privatized all gov services like postal and military, cut taxes for the rich, privatize necessities like water, sell off all public holdings like parks and forest lands, and cut government down to the size "you could drown in a bathtub". Just what the republicans and Trump are wanting to do. Glad somebody read the evidence rather than continue with the fantasy Reagan and Friedman promoted.
 
 
+8 # Working Class 2017-06-08 11:22
Chrisconnolly's statement This is corporate greed sold as economic growth" is the crux of the GOP economic plane over the years. God did not dictate the rules that run our economy. There are no laws of nature that say "a unregulated free market economy is the only system that can work." Yet many "leaders" want to us to believe just that. We should not be surprised when experiments like that we have seen in Kanas are exposed as a fig leaf to cover old fashion greed by those who already have most of the wealth. We need to finally make a basic decision...shou ld the majority of our people exist to only serve the economy and those who benefit the most by its rules, or should the rules of an economy be designed to serve the masses? I have heard from many friends that they think the system is broken. It is not, it is fixed and working exactly as designed. It just doesn't work as well for most and extremely well for the chosen ones.
 
 
+10 # Obwon 2017-06-08 10:48
Anything you privatize becomes "for profit". There are three ways of making a profit, either you cut services/expens es below income, or you raise prices or you do both. Obviously for parks, prisons, libraries, water and so forth, the for profit paradigm doesn't work to deliver a practical product.

For profit education will push failures out the door with degrees, to "prove" the entity is functioning properly, since it's cheaper to do it that way than to take the time to offer remedial measures. While prisons will simply become human warehouses, with some kind of window dressing to mask the shortcomings.

Trickle down doesn't work because, if you give wealthy people money, they have no reason to risk their windfalls doing business. Businesses don't hire more people, simply because they have more money. They hire more people only when they need them to serve more customers.

As Henry Ford knew: Customers are the true job creators. If you want more jobs, create more customers, so he raise wages to a then unheard of 5 dollar an hour, which meant that his thousands of employees could then buy his cars.

Take care of the ill, the young, the elderly and you free up family funds to buy more, that will create jobs.
 
 
+2 # Diane_Wilkinson_Trefethen_aka_tref 2017-06-08 15:34
#Obwon has it right. "Businesses don't hire more people, simply because they have more money. They hire more people only when they need them to serve more customers."

What do they do with more money?
1) They increase executive compensation to the moon,
2) They buy/bribe politicians with campaign "donations" so they can scam/skim even more tax payer dollars, and
3) They off-shore profits till they can get one of their own in the WH to "repatriate" the funds as 2%-5% inc tax rates.
 
 
+3 # boomerjim 2017-06-08 13:55
As my niece who lives in Kansas always says: "Because of Brownback, we can't have nice things."
 
 
+2 # BrainiacV 2017-06-08 14:51
So instead of investing, they companies just put the money in their pockets. The schools become underfunded so the workforce is uneducated. What company wants stupid workers? Then they deferred road maintenance, what company wants to locate where the roads are falling apart? So they set themselves up to lose money, but plan on making it in volume. Their argument was that they didn't cut the taxes enough and didn't let it run its course long enough. Denial, your name is Kansas.
 

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