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Kansas' Tax Experiment


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No kidding?

 

In 2012, Gov. Brownback called his state’s tax cuts a “real live experiment” in how tax-cutting affects the budget and the economy. So far, the main result of the experiment seems to be that cutting taxes causes the government to lose revenue.

http://www.nytimes.com/2014/10/23/upshot/kansas-faces-additional-revenue-shortfalls-after-tax-cuts.html?_r=0&abt=0002&abg=0

 

we need to try this in at least 49 more states for a period of at least several decades just to be sure.

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I'm not an economist but I thought I'd add a couple links that came up on first on my Google search which debate the tax increase or tax decrease positions. I think there is a balancing point when it does make sense - a decrease - but that balancing point isn't where we are today. In the JFK and Reagan years, tax decreases made sense and the govt revenue was in part increased because of the tax burden decrease.

The tax relief was significant enough to affect behavior of individuals and corporations to engage in tax revenue generating activity.

The 1st link states that other factors also helped wt the increase in revenue besides the tax cuts.

The 3rd link refers to the Laffer curve as shown. The UCLA economics professor talks about 33% or there abouts to be the 'break even point' for top tax earners - The 33% being the point we don't want to go below in taxes, and the higher you go from this point the law of diminishing returns start to occur - until you hit no returns at a 100% tax rate (people decide not to work).

The 2nd link - 2 repubs debating the issue - David Stockton and Mike Pence.

 

I think as a whole, repubs over simplify the topic - Tax cuts always good! When that isn't the case. First off, our tax burden isn't so high, that a cut would bring substantial changes in behavior of individuals or corporations - ie major purchasing, investing activity that produces revenue. Also, tax cuts along wt fighting 2 wars - not very good. Tax cuts along with huge deficits during the past 2 presidents - not a good thing.

 

At the same time, most Dems never have seen a tax increase they don't like so they can fund their social programs. At some point the tax burden becomes repressive (think of the original tea party). Prudence in spending (the back side of the revenue issue) along wt a healthy tax rate will yield a more fiscally sound govt. This admin and the last one have been like a pendulum - with spending and tax cuts extremes. GWB really took it to the extreme blindly - holding to tax cuts almost in a cult like fashion in spite of fighting 2 wars and paying for huge increases in medicare/prescription drug programs. Obama's issue is more on the spending side and not as much wt taxes unless one questions the wisdom of the huge spending & related taxes for ACA in the midst of trying to recover from 2008 recession and stimulus spending.

 

 

http://www.politifact.com/truth-o-meter/statements/2010/nov/09/mike-pence/mike-pence-says-raising-taxes-lowers-tax-revenues/

 

laffer-curve.png

 

 

 

http://www.forbes.com/sites/mikepatton/2012/10/15/do-tax-cuts-increase-government-revenue/

 

http://www.theblaze.com/stories/2012/09/10/does-raising-taxes-lead-to-more-govt-revenue-professor-shows-how-the-laffer-curve-debunks-liberal-myths/

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  • 2 months later...

Brownback, in 2012 and 2013, signed a two-part tax package exempting 191,000 businesses from income taxes and lowering the top income tax rate for individuals from 6.45 percent to 4.9 percent. It sinks to 3.9 percent by 2018 and even further toward zero each year if revenue grows.

 

Although income taxes composed almost half of Kansas’ general fund, Brownback said the cuts would grow the economy and attract new business, so that revenue would spring back quickly, essentially paying for the cuts. He had Reagan-era tax guru Arthur Laffer at his back supporting him.

 

But his plan didn’t pan out. Revenues are way down, and job growth remains below the national average. His own budget director says they may have to stop some of the tax cuts from going into effect, according to a New York Times interview.

http://www.politico.com/story/2014/12/gop-learns-lessons-from-brownbacks-tax-scare-113806.html?ml=po
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The state will reduce its contribution to KPERS, the state’s pension system, by $40.7 million by dropping the employer contribution rate to 9.5 percent from 12.1 percent.

 

 

 

http://www.kansas.com/news/politics-government/article4382802.html

 

They were wanting to privatize the pension plan. But then he wouldn't have anything to balance the budget with.

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Like all things you must find a balance.

This is true . . . and quite different than the false claims made by Brownback and company when they touted that their supply side economics would prevent a drop in revenue.

 

I'm not sure how many times we are going to have to rediscover that cutting taxes doesn't increase revenue.

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Like all things you must find a balance.

This is true . . . and quite different than the false claims made by Brownback and company when they touted that their supply side economics would prevent a drop in revenue.

 

I'm not sure how many times we are going to have to rediscover that cutting taxes doesn't increase revenue.

 

 

We just haven't cut taxes nearly enough, that's all

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  • 2 weeks later...

Sort of like taxing our way to prosperity / "economic stimulus"?

Is it tough to maintain your beliefs given recent tax increases and economic results?

 

...except tax cuts don't add debt.

I suspect that this statement is quite a useful clue as to the answer to my previous question.
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Democratically controlled Illinois would trade places with GOP Kansas in a nanosecond. Being broke is far superior to being in debt with no way out.

If we're cherry picking we could talk about Democratically controlled California's giant budget surplus compared to GOP Kansas' spiraling deficit.
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Democratically controlled Illinois would trade places with GOP Kansas in a nanosecond. Being broke is far superior to being in debt with no way out.

If we're cherry picking we could talk about Democratically controlled California's giant budget surplus compared to GOP Kansas' spiraling deficit.

 

If they have a surplus that is a huge change from where they were a few years ago.

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http://www.reuters.com/article/2014/11/19/us-california-budget-idUSKCN0J32CT20141119

 

California's state budget will accumulate more than $4 billion of reserves in the next two years, the budget watchdog estimated on Wednesday, a sign of significant progress for the debt-ridden state.

 

California's Legislative Analyst's Office said much of the extra money would most likely go toward education, the state's rainy day fund, and potentially paying down liabilities.

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