By the Democratic Staff of the Joint Economic Committee
Maybe, just maybe, the action taken by the Kansas legislature last week to end the massive tax cuts pushed by Governor Brownback and enacted five years ago will wake up Congressional Republicans to the folly of massive tax cuts for the wealthy as a means of economic growth.
The 2012 tax cuts, which were among the largest ever at the state level, handed out benefits to the wealthy and did enormous damage to the state’s economy. Bold promises of growth fueled by significantly lower tax rates didn’t materialize.
As seen in this chart, individual tax revenues plummeted, falling by more than 21 percent.
Funding for education fell through the floor, with the state Supreme Court ruling earlier this year that K-12 funding in Kansas is inadequate and unconstitutional.
To balance its budget, the state cut services and put off infrastructure projects. The state’s budget problems earned it downgrades from two bond rating agencies.
Since the tax cuts took effect, Kansas has trailed the U.S. in job growth, wage growth and economic growth (as seen in the chart below).
What went wrong?
The theory, as laid out by Arthur Laffer and Stephen Moore who teamed with Governor Brownback to design the Kansas tax cut, is straightforward: massive tax cuts benefitting the wealthy will generate broad economic growth that trickles down to everyone else and offsets the costs of the tax cuts.
There’s just one problem. Time and time again, history has shown tax cuts don’t pay for themselves. In fact, major tax cuts in the 1980s and early 2000s, under Presidents Reagan and George W. Bush, led to sharp increases in deficits.
Laffer and Moore also helped craft candidate Trump’s tax plan, which was the basis for the tax reform outline provided by the White House this spring. It’s the same authors, same approach and would deliver the same devastating results. But this time, the entire nation’s economy would be harmed.
Overall, Trump’s campaign tax plan would cost $6.2 trillion, according to the Tax Policy Center, with nearly half of the tax cuts going to the top one percent.
As the Kansas experience reminds us, tax cuts targeted at the wealthy don’t pay for themselves nor do they lead to faster economic growth. They lead to higher deficits and fewer services. We should know?—?and accept that?—?by now.
If our states are the nation’s laboratories, let’s make sure we pay close attention to Kansas’ experiment with tax reform.
