November 9, 2015
Slashing income taxes in 2012 created a damaging legacy that can’t be reversed quickly even if the Kansas Legislature decides to end the business income tax exemption, a Hutchinson audience was told Monday night.
The Hutchinson area chapter of Women for Kansas sponsored a presentation by the Kansas Center for Economic Growth’s executive director Annie McKay and senior fellow Duane Goossen. It drew about 60 people to the Hutchinson Community College campus. A mix of moderate Republicans and Democrats who appeared to agree that Gov. Sam Brownback’s tax policies aren’t working filled the audience.
The 2012 income tax legislation was supposed to spur business owners to expand their business and create more jobs.
That didn’t happen, McKay and Goossen pointed out.
Less than 1 percent of the 330,000 enjoying the tax exemption are getting enough money from the tax changes to hire even one moderately paid full-time worker, according to them.
As for the 60 percent of Kansas wage-earners reaping less than $42,000, the tax policies implemented from 2012 to 2015 have required them to pay more – not less – in taxes, according to the presentation.
At opposite poles are the wage-earners earning less than $23,000 a year and paying $197 more a year as a result of tax changes, and those wage-earners making $493,000 or more a year and seeing a tax drop of $24,632 a year.
They’re going to spend it on vacations, McKay said, and not on vacations in Kansas, either, because it doesn’t cost that much to visit Hays.
Goossen, a former state budget director for 12 years under three governors, said state revenues plunged by $700 million in the first year of the income tax cuts. The state dug into reserves to close the gap.
In the second year, the revenue stream remained down. The state eliminated the rest of its savings, dug further into the highway fund and delayed programs “so the state could just barely scrape by,” he said.
Legislators faced the task in early 2015 of dealing with expenses $800 million higher than expected revenue. They raised the sales tax and cigarette taxes and took even more from the highway fund, and tapped one-time money sources.
The general fund should have at least 7.5 percent in the bank at the end of the fiscal year. Cuts have been made so the balance is zero at the end of June 2016 when the fiscal year ends. It is widely expected more cuts will be needed.
“We’re in a situation here where we’re just going to live paycheck to paycheck,” Goossen said. The state isn’t prepared for a crisis – or for a Supreme Court ruling that could require more state aid for schools.
“Most states do not operate like this,” he said. “All of our energy now has to go into how to resolve this,” he said, and Kansas is “losing valuable years” in planning the state’s progress.
“If it didn’t work, why do we continue?” asked audience member Donna Stout. The question elicited audience applauce.
“There is a greater understanding, but not enough for the tipping point,” said McKay of the Republican-dominated Legislature.
State Rep. Steven Becker, a moderate Republican from Buhler, pointed out he was not in the Statehouse when the 2012 income tax package was passed, but it was one of the issues that led him to run.
He called the Kansas Center for Economic Growth “the only credible source of an overview of the economy that I have found.” Becker said the Brownback administration and legislative leadership offer a much different perspective on the numbers. That prompts Becker to wonder, “Are we even living in the same state?”
All 125 seats in the House and 40 seats in the Senate will be on the ballot in 2016. None of the other legislators representing Reno County attended the event, but one future candidate – Hutchinson Republican Ed Berger – was present. He recently announced he will run for the Senate seat held by Senate Majority Leader Terry Bruce, R-Nickerson.
Read more from The Hutchinson News here.