Kansas tax cuts arouse opposition instead of applause – Washington Times
DENVER, June 18, 2012 — There’s an interesting fight going on in Kansas between Governor Sam Brownback, who believes that tax cuts stimulate growth and seemingly everyone else in Kansas who lives off tax revenues.
It hasn’t been pretty so far.
Kansas Governor Sam Brownback lobbied for and finally got a tax plan through the Kansas legislature which will reduce income taxes by $847 million in 2014, and eliminate income taxes for 191,000 Kansas businesses. It creates a 3 percent income tax for the first $15,000 of a single filer’s income, and the first $30,000 for a married couple. Income above that would be taxed at 4.9 percent – instead of the existing rate of 6.45 percent.
If you’re a free-market person, a small business owner or a Kansas taxpayer you should be thrilled. The plan, passed by both houses of the Kansas legislature, should have generated a flood of positive reporting.
It did not. Lowering tax rates always results in job creation and increased net tax revenue but you’d never know it by listening to the reporting.
The headline in small-town Gardner, Kansas is all about the process, not the substance: “House passes tax plan using rare parliamentary procedure.” Were they talking about the Obamacare bill? The “rare procedure” turns out to be cutting off debate to force a vote.
Emphasized at every turn is the prediction that the tax cut will result in a $270 million deficit by 2014 or a $2.5 billion deficit in 2018. Not much is said about where those numbers come from.
The Kansas National Education Association said in a press release that the impact on education will be the equivalent of shuttering the Pentagon. I’m not sure I can even begin to understand what was meant by that phrase. What do schools have to do with defense? As I understand it, the bill restructures how taxes are calculated. What does that have to do with the number of tax dollars schools receive?
Perhaps one of the most innovative criticisms of the plan came from The Kansas City Examiner back in January, where writer Whitney Bell opined that the proposed tax plan is unbiblical, immoral and unjust because it hurts the poor.
What part of lower tax rates for all doesn’t she get?
The reason Bell cites is the elimination of tax credits and deductions—but when the tax rate is lowered, too, the net effect is that you don’t end up paying more—it’s just more like a flat tax. Earlier this year Arizona redefined its tax code in just that revenue-neutral way. Do the poor not benefit from state tax expenditures? Is it moral to give them government-provided things but force others to pay for it? Are the poor hurt if their taxes are the same but the calculation is simpler?
No they are not, but tax preparers are. Also hurt are industries that rely on tax deductions and credits to fuel demand, like the home building industry relies on the home mortgage deduction. Yet The Wichita Area Association of Realtors came out against the plan.
Deductions and credits drive behavior; indeed, they’re meant to. I have yet to hear a Democrat complain that eliminating deductions will hurt business. When they do approach the issue it is usually framed in terms of “tax loopholes” for “the rich.” Instead, they should focus on the rent-seeking aspects of tax policy.
The Brownback administration hired economist Arthur Laffer to help them design the proposal in January. In an article on the topic then, writer Scott Rothschild led with the phrase, “Gov. Sam Brownback’s proposal to increase taxes on poor Kansans…”
Hardly unbiased reporting.
One could accuse Rothschild of missing the point but he was obviously trying to make his own editorial point. Laffer is referred to as “consultant” rather than “economist” and we are given his salary for the project. The clear implication is that his advice shouldn’t be trusted because he was paid to give it. Really? I’m an IT consultant by day and I certainly wouldn’t be giving my advice if I weren’t being paid for it. What nonsense.
That nonsense is what I read again and again about the tax plan and heard over and over on the radio as the bill was being passed in May. The predicted deficit is the only quantitative evidence against the plan, everything else is wailing and gnashing of teeth and ad hominem attacks.
The prediction itself might be interesting as it is sourced—when it is sourced at all—to a state government office that seems to have the same function as the federal OMB in scoring tax bills. But the devil is in the details and we are never told anything about the economic models or assumptions used in making these dire predictions.
Kansas has been losing jobs for the past five years and the governor is betting that the tax cuts will turn that around. I will be very interested to see what happens. I’m betting on success for Kansas.
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