Kansas Senate Bill Substitute HB 2117

In May 2012, Kansas Governor Sam Brownback signed into law the Kansas Senate Bill Substitute HB 2117,[1] one of the largest income tax cuts in Kansas' history.[2] The bill was introduced in January 2011, was approved by Brownback on May 2012, and became effective on July 1st in the same year.[1]

The law eliminates income taxes for the owners of 191,000 businesses, and cuts individual's income tax rates.[3] The income tax cuts would provide US$231 million in tax relief in its first year, growing to US$934 million after six years.[3] A forecast from the Legislature’s research staff indicated that a budget shortfall will by emerge by 2014 and will grow to nearly US$2.5 billion by July 2018.[3] The cuts were based on model legislation published by the American Legislative Exchange Council (ALEC).[4][5]

Brownback described the tax cuts as a live experiment, stating that “[on]n taxes, you need to get your overall rates down, and you need to get your social manipulation out of it, in my estimation, to create growth. We’ll see how it works. We’ll have a real live experiment.”[6]

In an op-ed dated May 2014 in The Wall Street Journal, titled "A Midwest Renaissance Rooted in the Reagan Formula", Brownback compared his tax cut policies with those of Ronald Reagan, and announced a “prosperous future” for Kansas, Oklahoma and Missouri, by having elected the economic principles that Reagan laid out in 1964.[7]

Reception

The act has received criticism for shifting the tax burden from wealthy Kansans to low- and moderate-income workers,[8] with the top income tax rate dropping by 25%.[9] Under Brownback, Kansas also lowered the sales tax and eliminated a tax on small businesses.[9] The tax cuts helped contribute to Moody's downgrading of the state's bond rating in 2014.[10] They also contributed to the S&P Ratings' credit downgrade from AA+ to AA in August 2014 due to a budget that analysts described as structurally unbalanced.[11]

Brownback's tax consultant and supply-side economist Arthur Laffer said the cuts would support job growth, but the state has lagged national rates since.[12] As of June 2014, the state has fallen far short of projected tax collections, receiving $369 million instead of the planned-for $651 million.[13]

According to Michael Hiltzik in an article published on July 2014, job growth in Kansas is trailing behind the national trend, revenues are declining every month, and courts and state services as well as and healthcare and assistance to the poor have suffered as a results from the cuts.[14] According to the Center on Budget and Policy Priorities, the changes introduced by Brownback will cut the taxes of the wealthiest 1% of Kansans by 2.2%, while the poorest 20% of Kansans will see their taxes increase by 1.3%, and that the large revenue losses deepened the recession's damage to schools and other state services while not boosting the economy, and warns that “States considering deep tax cuts in hopes of sparking a surge of economic growth should look carefully at Kansas.”[15]

Grover Norquist, defended Brownback’s tax cuts as “the right think for the economy”, and asserted that Kansas is in better economic shape than what has been described by critics, noting that 57,000 jobs were created in the private sector and more funds have been invested on education than in the past. He further asserted that Kansas “[has] provided a model, a successful model, that will phase out the income tax.”[16]

The editorial board of the Washington Post wrote in September 2014, that Brownback has undertaken “an extreme trial-by-revenue-deprivation in a state so clearly lacking the economic means to withstand it”, asserting that job creation and economic growth in Kansas are lagging those of its neighbor states, and calls these policies “radical” and an departure from the more pragmatic previous conservative traditions in Kansas.[17] '

The New Republic reported on the cuts as having a negative impact on public education, resulting in larger class sizes, increased fees for kindergarten, the elimination of funded arts programs and the reduction in janitorial personnel and librarians, and described Brownback's attempt to create a “conservative utopia” as failing to increase job growth.[18]

Brownback's “conservative experiment” was described in the New York Times as a laboratory for policies that are “too far to the right”. As a result, more than 100 current and former Republican elected officials endorsed Paul Davis, Brownback's opponent in the 2014 gubernatorial race.[19]

External links

References

  1. 1 2 "Senate Substitute for HB 2117 by Committee on Taxation -- Reduction of income tax rates for individuals and determination of income tax credits; severance tax exemptions; homestead property tax refunds; food sales tax refunds". Retrieved 29 October 2014.
  2. ↑ "Kansas small-business owners say elimination of income tax is a big help". The Wichita Eagle. May 24, 2012.
  3. 1 2 3 "Brownback Signs Tax Cuts Law In Statehouse Ceremony". KAKE News. Retrieved 29 October 2014.
  4. ↑ Rothschild, Scott (December 17, 2013). "Brownback says perception of ALEC influence is 'overblown'". Lawrence Journal-World.
  5. ↑ Pilkington, Ed (November 20, 2013). "Obamacare faces new threat at state level from corporate interest group Alec". The Guardian.
  6. ↑ "Brownback gets heat for ‘real live experiment’ comment on tax cuts". Lawrence Journal World. Retrieved 28 October 2014.
  7. ↑ Brownback, Sam. "A Midwest Renaissance Rooted in the Reagan Formula". Retrieved 28 October 2014.
  8. ↑ "Kansas tax act most regressive in nation". The Lawrence Journal-World. May 24, 2012.
  9. 1 2 Peters, Mark (10 June 2014). "Sam Brownback's Tax-Cut Push Puts Kansas Out on Its Own". Wall Street Journal. Retrieved 13 June 2014.
  10. ↑ Kraske, Steve (2 May 2014). "Gov. Sam Brownback suffers a political brownout". The Kansas City Star. Retrieved 13 June 2014.
  11. ↑ Reuters Staff. "S&P downgrades Kansas in another blow to Brownback tax cuts". www.reuters.com. Reuters. Retrieved 7 August 2014.
  12. ↑ Peters, Mark. "Sam Brownback's Tax-Cut Push Puts Kansas Out on Its Own". Wall Street Journal. Retrieved 27 October 2014.
  13. ↑ Josh Barro (June 27, 2014). "Yes, if You Cut Taxes, You Get Less Tax Revenue". The New York Times. Retrieved September 2, 2014.
  14. ↑ Hiltzik, Michael (9 July 2014). "How Tea Party tax cuts are turning Kansas into a smoking ruin". Los Angeles Times. Retrieved 27 October 2014.
  15. ↑ Michael Leachman; Chris Mai (27 March 2014). "Lessons for Other States from Kansas’ Massive Tax Cuts" (PDF). Retrieved 27 October 2014.
  16. ↑ "Norquist defends tax cuts despite Brownback woes in Kansas". The Hill. Retrieved 29 October 2014.
  17. ↑ Editorial Board (21 September 2014). "Sam Brownback’s failed ‘experiment’ puts state on path to penury". The Washington Post. Retrieved 28 October 2014.
  18. ↑ Judis, John. "This Is What's the Matter With Kansas". Retrieved 28 October 2014.
  19. ↑ Eligonsept, John (14 September 2014). "Conservative Experiment Faces Revolt in Reliably Red Kansas". The New York Times. Retrieved 28 October 2014.
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