What’s Going On In Kansas?

In 2010, Sam Brownback, a sitting U.S. senator, ran for governor of Kansas on an economic platform created by the American Legislative Exchange Council, a group that specializes in promoting draft legislation.

Once elected, with help from Arthur Laffer – Ronald Reagan’s mastermind of trickle-down economics – Brownback convinced state legislators to cut personal income tax rates across the board and eliminate the top tax bracket. He promised to slash taxes on business owners and lower personal income tax rates, unleashing an economic renaissance in Kansas.

Kansas State Capital - Topeka

Kansas State Capital | Topeka

The tax cuts were sold by Brownback with the idea that they would pay for themselves when a renewed economy boosted state revenues despite the lower rates.

At least that was the plan.

I have been following the story of Brownback’s tax cuts for a couple of years and it has grown more interesting as the results have come in and the impacts have become more clear.

For a comprehensive look at what was promised, what was delivered, and the results thus far, check out the recent article by Barry Ritholtz, Kansas Ends Bad Economic News by Not Reporting It, at Bloomberg.

Blogger-in-Chief here at RetirementSavvy and author of Sin City Greed, Cream City Hustle and RENDEZVOUS WITH RETIREMENT: A Guide to Getting Fiscally Fit.

2 Comments

  1. I’ve been following this scenario as well JM, though Forbes paints the issue differently. Also, I’m not sure one can base one states financial situation and the method they’re using to stimulate their economy and apply it to the nation as a whole. Our national economy is far too diverse. One thing we do know is that we as a nation are now nearly $20 trillion in debt and growing (over spending) by most economists at the alarming rate of nearly $36,000 per second. This, and with only six in ten eligible workers in the work force, it’s hard to see the light at the end of the tunnel. The DOL needs to realign how they report unemployment numbers.

    At this point, I think it’s safe to say that “investing” (read deficit spending) hasn’t worked. A good friend of mine who is a long time CFP up in Phoenix tells me that if you’re deep in debt, stop digging (borrowing). My solution would be to blow the dust off the Bowles/Simpson plan that was inevitably shelved by the President. I thought his (President Obama) approach to tackling the deficit by putting this commission together back in ’09 – ’10 was spot on. The commission had both parties sit down and work out a plan that had a combination of tax increases, spending cuts and a slimming down of the tax code. Everybody would feel some pain, no one was exempt. Reagonomics didn’t work with tax cuts alone. It did succeed when David Stockman advised him to raise taxes to offset tax cuts back in ’83. The economy then took off. Makes me wonder where we would be or even if we would be having this conversation today if the President had enacted the recommendations of the Simpson/Bowles commission.

    See you one the first tee Wednesday!

    • While I haven’t read all the material at Forbes on the topic, an article by Howard Glickman, What’s The Matter With Kansas And Its Tax Cuts? It Can’t Do Math is in line with other material I have read on the subject.

      His conclusion …

      “One can argue whether cutting taxes is a good thing. One can argue about whether government is too big. One can even argue about whether low taxes increase business activity. But one cannot credibly argue that tax cuts increase revenue or even pay for themselves. They didn’t for Ronald Reagan. They don’t for Sam Brownback. They won’t for the next politician who tries—whether he (or she) is in Washington, D.C. or in some state capital.”

      He perfectly captures what I have long argued. While there are situations where taxes can be cut, any honest individual has to acknowledge that means there will be less revenue. Period. Moreover, just as there may be times when taxes can be (should be) cut, there are absolutely times when taxes can be (should be) raised.

      Indeed, my friend. Wednesday on the tee!

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