September 9, 2015
In advance of next week’s vote on the state budget, more than 50 legislators gathered in Concord today to hear a first-hand account of the wide-reaching impacts of Kansas tax cuts and to consider the consequences of similar efforts to reduce taxes here in New Hampshire. Hosted by the New Hampshire Fiscal Policy Institute, “Kansas Tax Cuts: Lessons for New Hampshire” sought to help policymakers develop a deeper understanding of the effect tax cuts are having on families and communities in Kansas and to demonstrate the failure of tax cuts to produce promised economic growth, the main argument offered in favor of lower business tax rates in New Hampshire.
“Throughout the debate over business taxes, we’ve been told tax cuts are necessary to make New Hampshire more competitive and to boost its economy. Yet, as Kansas’ experience makes clear, tax cuts are no guarantee of job growth. Choosing tax cuts over investments in education and infrastructure will lead the state into a downward spiral,” said Jeff McLynch, executive director of the New Hampshire Fiscal Policy Institute.
The event featured a panel discussion and presentation by Kansas Center for Economic Growth Executive Director Annie McKay and Senior Fellow Duane Goossen. Mr. Goossen was the Kansas state budget director from 1998 to 2010 and served seven terms in the Kansas House of Representatives.
“A misguided plan to cut taxes for Kansas businesses in the name of job growth resulted in a tax shift, which increased taxes on hardworking Kansas families. Lawmakers promised Kansans ‘pro-growth’ tax policy, but all this plan delivered was an increase in the number of families struggling to make ends meet,” said Annie McKay.
Proponents of business tax cuts suggest that business taxes in New Hampshire are out of line with other states and that tax cuts are needed to make the Granite State more competitive. The budget plan approved by the legislature in June included multiple changes to New Hampshire’s business tax structure, changes that would drain more than $20 million out of the FY 2016-2017 budget and more than $100 million out of each future budget, once fully implemented. Governor Hassan vetoed the budget in part due to the impact this revenue loss would have on future budgets.
“Kansas went from annual budget surpluses to massive deficits as a result of these tax cuts, which were promoted as necessary to support businesses and to increase economic growth,” said Duane Goossen. “These tax cuts left the state unable to balance its budget, led to a credit downgrade for the state, and forced increases in other taxes and fees for average citizens. What’s more, Kansas’ job growth rate continues to lag the region, and businesses and families have left the state due to its lack of investment in important public services.”
The first full year of tax cuts in Kansas resulted in greater revenue loss than the three years of the Great Recession combined, a revenue shortfall that is jeopardizing funding for education, roads and bridges, and other components essential to a strong economy. Efforts to close the Kansas budget gap also put added pressure on local governments and forced many areas to raise property taxes in order to maintain basic levels of service. In fact, 67 counties enacted property tax increases to offset the added cost of downshifted responsibilities. Property taxes increased by as much as 20 percent in some counties, and 17 of the 20 counties with the highest increases were rural.
“As the Kansas experiment demonstrates, tax cuts that drain state resources have far reaching impacts for families, communities, and state economies. New Hampshire cannot afford to follow Kansas’ perilous path,” said NHFPI Executive Director Jeff McLynch.
“New Hampshire already lacks sufficient resources to meet its needs,” added McLynch. “Reducing revenue still further will only make it harder to maintain our roads, educate our children, and provide health, safety, and other public services essential to ensuring a strong economy and shared prosperity for all in the Granite State.”
Read more from the New Hampshire Fiscal Policy Institute here.