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Let’s Learn From Failed Kansas Tax Experiment


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July 4, 2017
By Andy Brack | Contributing Writer

The conservative political mantra of “cut, cut, cut” government to spur economic growth has been exposed for what it has been all along: a load of hogwash.

In South Carolina, political leaders charmed by aggressive tax cuts should just turn to Kansas to see the fallout of taking an ideology to the extreme. Republicans, in control of the Kansas House and Senate, this month ditched years of austerity by raising taxes by $1.2 billion over two years – more than $200 for every man, woman and child in the state. Just to make up for lost ground, a family of four will have to pay an average of more than $800 a year following years of tax frugality that strapped schools and crippled delivery of services that Kansans wanted.

The Kansas experiment should serve as a warning that extremism of any form doesn’t serve the common good.

Seven years ago when former presidential candidate Sam Brownback left the U.S. Senate to become governor of Kansas, he pushed hard to the right by advocating looser gun restrictions, harsher voting laws, tougher abortion restrictions and big income tax reductions. At the time, this true acolyte of trickle-down economics said the massive tax cuts would be “like a shot of adrenaline in the heart of the Kansas economy.”

Except it didn’t work out that way. While the federal government may be able to borrow and spend like drunken sailors without much blowback because they can borrow money to cover shortfalls, states like Kansas and South Carolina have balanced budget requirements in place to ensure fiscal stability.

By 2014, Kansans were paying hundreds of millions less in taxes – far less than the state projected. Shortfalls ensued. Critical services were cut. Then moderate Republicans voted hard-liners out of office, threatening Brownback’s Norquistian experiment to make state government so small that it would drown in a bathtub.

Perhaps the nail of death for the experiment was a March decision by the Kansas Supreme Court that found the state was spending way too little on public education based on its constitution. By last week, after a couple of fits and starts, the Republican-controlled legislature had had enough. Lawmakers raised taxes to replace lost revenue and cover projected shortfalls of $889 million by June 2019. According to the Associated Press, income tax rates will rise with a new top rate that is 5.7 percent, more than a point above the current rate. The state is also axing a law that essentially calls for automatic cuts if revenues grow. And it’s getting rid of a special tax break for thousands of farmers and small businesses.

Columnist Michael Tomasky wrote in The New York Times that Brownback’s tax efforts were as close to the perfect experiment in supply-side economics ever done in America. But the promised rewards never happened because Kansas experienced only 0.2 percent growth as other states were growing an average rate of 10 times as much.

The mantra of “no new taxes” and pledges to never raise taxes have no place in our state government, as the Kansas example proves.

“The Republican tax position even bears a share of the blame for our current polarization,” Tomasky wrote. “Republicans once recognized the principle that public purposes sometimes justified the raising of additional revenue. They might have balked at the specific number the Democrats proposed, but they accepted that taxes were negotiable.”

South Carolinians can elect leaders who use good judgment to keep taxes low, but who also use power judiciously to raise taxes when they’re needed – as in this year’s case to boost the gas tax and generate billions for potholed roads.

A one-sized tax policy doesn’t work for states in the global economy. South Carolina needs to balance revenues, spending, cuts and growth to ensure it is competitive for the future. Slashing and burning doesn’t work in well-managed forests. It doesn’t work for well-managed states either.

Andy Brack is editor and publisher of Statehouse Report.  Have a comment?
Send to:  feedback@statehousereport.com

 

One Comment

  1. Another simplistic argument against low taxes, using data from pro-tax sources. SC is among the fastest growing states for new investment, job creation and population growth. Why ? Low relative tax rates and a pro business incentive environment. SC is ranked 37 out of 50 for overall tax burden, meaning 36 of the 50 states have a more burdensome tax system in place. Our state bond credit rating is proof that our tax and revenue model works. Of the lowest tax states (omitting Alaska because they offset taxes with oil revenue), one finds Delaware, Tennessee and Oklahoma. All 3 states enjoy robust job growth and outside investment. NY has the highest tax burden and leads the nation in job and investment contraction. NY state bond credit rating in significantly below that of SC, meaning NY has to pay a higher interest rate to borrow money, yet they also have the highest tax burden in the nation.

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