Kansas' Tax Experiment

[knapplc]

Connecticut's issues can't simply be boiled down to "it's a mistake to tax the rich." They rely heavily on hedge fund earnings and the hedge fund market has taken a downturn. Had the hedge fund market not turned, it's likely Connecticut's plan would be fine.

 

They are also one of the few states in that region experiencing a population decline. New York, which has a similar tax strategy, is doing fine - not coincidentally, its population is growing.

[RedDenver]

This is an old tread - But it appears Kansas isn't the only one with a tax policy that falls short.

How on the other side of the coin we have Connecticut now discovering that you can't go to the well to often (tax the wealthy).

As always there needs to be a balance. Cutting taxes too much can hurt and taxing too much can also work against the states overall goals.

The trick is to find the sweet spot between tax levels and spending levels.

 

https://www.wsj.com/articles/connecticut-nations-wealthiest-state-may-be-tapped-out-on-taxing-the-rich-1495186203

FYI, here's the same article without the need to signup for the WSJ: http://www.foxbusiness.com/features/2017/05/19/connecticut-nations-wealthiest-state-may-be-tapped-out-on-taxing-rich.html

 

Keep in mind that WSJ is very favorable to Wall Street, so that they would write an article about taxes being too high on hedge fund managers should be no surprise. As for the content, note that "Connecticut, which has the highest per capita income in the country." That's what you'd actually want in your state economy - not at all like Kansas. Sounds like the high tax rate was working well, but they've hit an issue because they're heavily dependent on a single industry (hedge funds) which is experiencing a downturn.

[TGHusker]

Connecticut's issues can't simply be boiled down to "it's a mistake to tax the rich." They rely heavily on hedge fund earnings and the hedge fund market has taken a downturn. Had the hedge fund market not turned, it's likely Connecticut's plan would be fine.

 

They are also one of the few states in that region experiencing a population decline. New York, which has a similar tax strategy, is doing fine - not coincidentally, its population is growing.

All true and I can say something similar that is going on here in Okla. The state started a path of cutting state taxes (a yearly reduction to a certain target rate) in the midst of high oil revenues. Like Conn, they were to dependent on one industry - oil. Oil went down, the budget is now facing a $800m shortfall. The state also gave tax concessions to the wind turbine industry - the actual generation farms not the manufacturing of the turbine. Those tax concessions was only to be $2m/year. This past year it was $120m+ approx. Poor foresight and too reliant on one industry. So it appears the best plan is the one that encourages diversity in the state economy and the correct balance between spending and taxation. Yes, Okla was rolling in money for many of the 'fracking' years, yet the opportunity was wasted - our teachers are still some of the lowest paid and our highways and bridges need a lot of work .

[Danny Bateman]

 

[funhusker]

Pete Ricketts: "Hold my beer......"

[BigRedBuster]

[ZRod]

It's different though... that's a sparsely populated state. Jist not enough of an economy to have an impact. Sad.

[BigRedBuster]

What it tells me is that,even though I am for lower taxes, there is a limit to how low you can go and still function as a government.

 

That's true no matter if you're a small state or the federal government.

 

The trick is to find that sweet spot where the government functions and the people kept as much of their money as possible.

 

And have major debate on expenses.

[ZRod]

What it tells me is that,even though I am for lower taxes, there is a limit to how low you can go and still function as a government.

That's true no matter if you're a small state or the federal government.

The trick is to find that sweet spot where the government functions and the people kept as much of their money as possible.

And have major debate on expenses.

I know there are studies on exactly what that sweet spot is. I remeber discussing it in macro econ back in college. It's a prettt basic concept, but most people really don't think about it because they look at things from the micro. Every system wants to find equilibrium.

[RedDenver]

What it tells me is that,even though I am for lower taxes, there is a limit to how low you can go and still function as a government.

 

That's true no matter if you're a small state or the federal government.

 

The trick is to find that sweet spot where the government functions and the people kept as much of their money as possible.

 

And have major debate on expenses.

I think people forget that taxes also stimulate the economy - that money goes somewhere. And that it can often be more beneficial to the economy (for example, if spent on infrastructure and education).

[RedDenver]

 

What it tells me is that,even though I am for lower taxes, there is a limit to how low you can go and still function as a government.

That's true no matter if you're a small state or the federal government.

The trick is to find that sweet spot where the government functions and the people kept as much of their money as possible.

And have major debate on expenses.

I know there are studies on exactly what that sweet spot is. I remeber discussing it in macro econ back in college. It's a prettt basic concept, but most people really don't think about it because they look at things from the micro. Every system wants to find equilibrium.

 

One of my issues with economics is the idea that systems tend towards equilibria - that's just not true. Complex systems can diverge, have limit cycles, even have equilibria that change over time, etc.

[ZRod]

 

 

What it tells me is that,even though I am for lower taxes, there is a limit to how low you can go and still function as a government.

That's true no matter if you're a small state or the federal government.

The trick is to find that sweet spot where the government functions and the people kept as much of their money as possible.

And have major debate on expenses.

 

I know there are studies on exactly what that sweet spot is. I remeber discussing it in macro econ back in college. It's a prettt basic concept, but most people really don't think about it because they look at things from the micro. Every system wants to find equilibrium.

One of my issues with economics is the idea that systems tend towards equilibria - that's just not true. Complex systems can diverge, have limit cycles, even have equilibria that change over time, etc.

Then I would think your probably looking at a subsystem. That's why economics is so conplicatedn beacuse there are thousands of seperate systems that all influence each other and work together.

[BigRedBuster]

I believe that the appropriate tax rate is different at different times.

[RedDenver]

 

 

 

What it tells me is that,even though I am for lower taxes, there is a limit to how low you can go and still function as a government.

That's true no matter if you're a small state or the federal government.

The trick is to find that sweet spot where the government functions and the people kept as much of their money as possible.

And have major debate on expenses.

I know there are studies on exactly what that sweet spot is. I remeber discussing it in macro econ back in college. It's a prettt basic concept, but most people really don't think about it because they look at things from the micro. Every system wants to find equilibrium.

One of my issues with economics is the idea that systems tend towards equilibria - that's just not true. Complex systems can diverge, have limit cycles, even have equilibria that change over time, etc.

Then I would think your probably looking at a subsystem. That's why economics is so conplicatedn beacuse there are thousands of seperate systems that all influence each other and work together.

 

I don't understand what you're saying. I'm challenging the idea that every system wants to find equilibrium - regardless of whether that's classified as a system, subsystem, sub-subsystem, or whatever.

[RedDenver]

I believe that the appropriate tax rate is different at different times.

Based on how the population, mnufacturing, information, etc. are constantly changing, that seems likely.