Kansas’ Tax Cut Fantasy vs. Economic Reality

January 13, 2016

Proponents of the 2012-13 Kansas tax changes asserted their efforts would jumpstart the state’s economy, but this has – predictably – turned out to be just a fantasy. Here are three key points as we kick-off the New Year, new legislative session, and digest claims from the State of the State address.

The Fanciful Idea for the Tax Cuts Came from a Faulty and Flawed Analysis.

Proponents of unprecedented tax changes claimed that Kansas’ economic performance during the so-called ‘lost decade’ (2000 to 2010) warranted big changes to jumpstart growth. Unfortunately, there are big problems with that assumption. One is that Kansas’ economic performance was not entirely lost during that period. In our recent report on the ‘lost decade’, we find that Kansas’ economy then actually outperforms our economy now, in several ways, since the tax cuts went into effect. A second problem was the assumption that tax cuts would magically lead to an economic boon to our state. They haven’t and they won’t.

Kansas Continues to Lag the Region and Nation in Job Growth.

Though the health of an economy is more than just job growth, it’s a good place to start. While proponents of the tax cut fantasy proclaimed that job growth would be near-immediate – and still maintain that Kansas’ economy is doing great – reality shows that Kansas’ job growth is still in the back of the pack since the tax cuts went into effect:

KSjobsthruNov15

Blaming a Sluggish National Economy for Kansas’ Troubles Isn’t Accurate.

This last week, figures released by the Bureau of Labor Statistics highlight good economic news about the national economy: 292,000 people were hired around the country in the month of December. Although statements from proponents of the failed tax cut experiment might have you think the national economy is in a recession, those few hundred thousand people who got jobs last month would beg to differ. In actuality, we’ve not been in a recession for over six years and the national economy is humming along.

Despite the denial, the gap between the tax cut fantasy and Kansas’ reality continues to grow. The facts are straightforward about Kansas – we lag behind in economic growth and we face another budget deficit for this year and the next budget year, despite the largest tax hike in history, record high transfers from the highway fund and continuous lowering of revenue projections.

Since passing unprecedented and unaffordable tax changes in 2012 and 2013, Kansas has burned through its savings account, repeatedly relied on one-time sources of money for budget fixes, and struggled to make revenue projections. The legislature and Governor can take a first step to remedying our ongoing revenue issues by fixing Kansas’ failed tax policy, starting with the loophole that exempts 330,000 Kansans from paying income taxes.

ClayKansas’ Tax Cut Fantasy vs. Economic Reality