OCT 24, 2016 1:56 PM EDT Bloomberg News
*How a Republican Governor became the most despised Governor of all the
50 states by using the Republican Play Book on Economics.**
**Now he takes a page from China and stops reporting Bad Economic News.*
*A quick refresher: In 2010, Brownback, a U.S. senator, ran for governor
on an economic platform created by the American Legislative Exchange
Council, **
**a conservative group that specializes in promoting draft legislation.
He promised to slash taxes on business owners and lower personal income
tax rates, **
**unleashing an economic renaissance in Kansas. (Notice, it's the same
thing Trump is saying now. RG)*
*In May 2012, he signed the bill into law. It initially lowered the top
personal tax rate to 4.9 percent (it’s now 4.6 percent) from 6.45
percent, but most importantly, **
**it eliminated income tax on profits for owners of limited liability
companies, subchapter S corporations and sole proprietorships. **
***
Give Brownback credit for passing the exact legislation he had promised.
The results, however, haven’t been very encouraging. Indeed, *since the
tax cuts were passed, almost nothing has gone as promised in Kansas.
Revenue plunged
and the state resorted to pulling money out of its rainy-day fund to
plug the holes. A number of critical services, including for road
maintenance and schools, were cut.
The business climate has been poor, and the economy has lagged behind
neighboring states as well as the rest of the country.*
Why hasn’t this worked out? As we have discussed before, the failure of
the Kansas tax cuts to do what was promised is a simple combination of
state budget math and human psychology.
The math is simple: Tax cuts tend to reduce revenue, in Kansas’ case
much more than expected. To change people’s behavior requires more
substantial incentives than
changing things by a few percentage points. The reduced revenue led to
spending cuts that lowered quality of life. In response, rising numbers
of people and companies have left the state.
Just consider what Brownback did. The elimination of taxes on
pass-through income simply benefited existing business, many more of
which took advantage of the change than
expected. And really, who is going to move to Kansas now that the top
personal tax rate is 4.6 percent versus 6.45 percent? I can tell you I’m
not packing up the U-Haul.
Brownback had asked his Council of Economic Advisors to report to him to
measure the impact of the tax cuts -- likely because he expected good
things. His critics have delighted in
pointing out that the quarterly report was cancelled after it showed the
opposite economic effect of what Brownback had promised. “He
specifically asked the council to hold him
accountable through rigorous performance metrics,” Heidi Holliday,
executive director of the Kansas Center for Economic Growth, told the
Topeka Capital-Journal.
A summary of the Brownback record shows:
Kansas’ gross state product fell behind the six-state region and the
nation for the third straight year. (*Kansas’ gross state product grew
at a faster rate when compared to the **
**region and the nation in three of the five years before Brownback took
office in 2011).*
Private industry wages in Kansas grew at a slower pace last year than
they did in the region and the U.S. -- as they did during the past five
years.
The number of private business establishments in Kansas trailed both the
region and the nation for the last year, again continuing a five-year trend.
*By just about every measure, Kansas’ tax experiment has failed to meet
the promised performance objectives. Killing the quarterly report won’t
change this. If anything -- **
**-- ending the reporting may make things worse.*
*Brownback is now said to be considering tax hikes.* He has paid the
deserved price for his errors, *with a 26 percent approval rating, the
lowest of any governor in the U.S. *
The people of Kansas have paid a bigger price. Undoing the harm will
take a new governor and, though it may seem far-fetched, He should step
down and make way
for fresh leadership.
