Gauging the Kansas Economy

July 22, 2014

Kansas is all over the news lately but not for the reasons we’d like to see. Many have highlighted that the deep, unprecedented tax cuts enacted in 2012 have not been the boon to the economy that was promised and that revenue has plunged, making it hard for Kansas to invest in the things that matter most, like education. KCEG will provide an ongoing look at select indicators of our state’s fiscal and economic health in the aftermath of the tax cuts.

So far, Kansas’ tax cuts do not appear to have given us the competitive edge that supporters promised. Since the tax cuts went into effect in January 2013, private-sector job growth has been slower than in many neighboring states. At 2.1% growth, Kansas only slightly outpaces Arkansas (1.2%) and Nebraska (1.2%).  Colorado (4.5%) and Iowa (4.5%) have grown by more than double the rate of Kansas. Missouri (2.3%) and Oklahoma (3%) also come out ahead.

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In the meantime, the state’s finances are deteriorating. Total revenues—which Kansas uses to pay for key services like our neighborhood schools, safe communities, health care and more—have dropped. And there’s just no telling how far they might fall before they bottom out.

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Revenues are $698 million lower than they would have been without the tax cuts, according to estimates from the Kansas Legislative Research Department. And revenues are lower than predicted even when accounting for the tax cuts. Between July 2013 and June 2014, Kansas collected $333 million less than expected primarily because of a $307 million decline in income tax collections. In May 2014 alone, revenues were $184 million below expectations. And while tax-cut proponents claimed they would give people more money to spend in the economy, sales tax collections don’t seem to have gotten a boost. In fact, they’re down just slightly from July 2013.

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The tax cuts were advertised as an “adrenaline shot to the heart of the Kansas economy” and a driver of private job growth, but clearly the job boom has yet to materialize in the Sunflower State.

ClayGauging the Kansas Economy