This article was published at The McAlvany Intelligence Advisor on Wednesday, September 24, 2014:
Big government liberals and high spending politicians have converged on Kansas, seeing an opportunity to discredit not only Ronald Reagan’s tax policies but to get even with the Tea Party, which took out a number of “moderate” Republicans in the state Senate over the last two election cycles.
Gov. Sam Brownback (pictured above), a supporter of less government and lower taxes, was able to ride the conservative wave that resulted in tax reform that not only increased an individual taxpayer’s standard deduction from $4,500 to $5,500 but also decreased the state’s marginal tax rates from 6.25% to 4.8% for those earning more than $15,000 a year, and from 3.5% to 2.7% for those earning less. Brownback’s tax reform will continue into the future with further marginal rate reductions and cuts in property taxes as well.
What happened was predictable: revenues into the state’s coffers dropped. Thanks to the impact of the Great Recession and federal rules that skewed tax collections, the shortfall was more than expected and liberals jumped at the chance to attack Reagan’s tax policies, the Tea Party, and the governor, instead supporting his opponent in the upcoming election. It was a “three-fer” – an opportunity not to be missed.
The liberal Kansas City Star noted that “the state’s finances are in a huge hole that could get a lot deeper. “A state that is already short-changing its schools, underpaying its employees, and running disgraceful waiting lists for disabled citizens who need services is likely to experience even more pain – unless elected officials repair bad decisions made in the last two years.” The paper not only pointed out that the state suffered a revenue shortfall of $310 million as of the end of May, it made up some assumptions that the shortfall would not only continue but would get worse over time in an obvious attempt to scare the ignoranti into returning the big spenders to Topeka. It also blamed a recent credit downgrade on Brownback, despite the fact that that downgrade was based on financial difficulties that were evident long before Brownback took office. The Star concluded that “the state is in a fiscal crisis…. The Kansas government is starving, and politicians are going to have to contemplate the unthinkable – a rollback of the draconian tax cuts that never should’ve been passed.”
US News delighted in pointing out that the “Kansas disaster” is putting the lie to the anti-tax argument. Wrote Chad Stone:
Kansas is the poster child for cutting taxes sharply in line with recommendations of the American Legislative Exchange Council, or ALEC. Its calls for deep tax cuts and limits on revenues and spending that reflect extreme “supply-side” and anti-tax arguments….
Now we see that these policies have been a budgetary disaster for Kansas…. State revenues have plummeted, employment growth continues to lag the national average, and the state’s credit rating has been downgraded.
In his campaign for reelection, Governor Brownback faces not only a liberal Democrat, Paul Davis but the ire of a number of “moderate” Republicans who are still steamed that they were run out of office by Tea Party activists over the last two election cycles. That group of malcontents, now numbering more than 100, call themselves Republicans for Kansas Values, and have stated publicly that their endorsement of Davis was not to elect a Democrat but to defeat Brownback and repeal his reforms.
Those reforms, enacted less than two years ago, are beginning to revive Kansas’s moribund economy. But that revival may not be enough to keep Brownback in office. In late July, the Wall Street Journal noted that private job growth between January 2013 and June 2014 was significantly ahead of that in neighboring states of Nebraska, Iowa, and Oklahoma. According to the Associated General Contractors of America, Kansas recorded the fourth highest growth in construction nationwide between March 2013 and March 2014.
Brownback also got a little help from the report from the US Bureau of Economic Analysis (BEA), which noted that in the last quarter of 2013, Kansas’s GDP grew at an annual rate of 3.1%, more than its neighboring states of Missouri, Nebraska, and Oklahoma. That trend appears to be continuing, according to the Kansas Department of Labor, which reported last Friday that the state’s unemployment rate dropped from 5.4% to 4.9% over the last year and that, in August, the state gained 2,400 private-sector jobs.
In Kansas, the patient is recovering, but it may not be in time to rescue Brownback. If he loses to Davis, the irony will be that Davis’s administration will benefit from a recovery generated by the policies of his opponent and predecessor.
USNews: Kansas’ Tax Cut Disaster
The Wall Street Journal: Why Liberals Hate Kansas
US Bureau of Economic Analysis: Quarterly Gross Domestic Product by State, 2005–2013 (Prototype Statistics)
Kansas Department of Labor: Unemployment rate – and job numbers – fall in August