When pushing his tax cuts for Kansas in July 2012, Governor Sam Brownback wrote: “Our new pro-growth tax policy will be like a shot of adrenaline into the heart of the Kansas economy.” Art Laffer and Stephen Moore wrote that “many states like Kansas, Missouri, and Oklahoma are seriously considering abolishing their income taxes to accelerate growth,” and that they “have advised Oklahoma, Kansas, and other states to cut their income tax rates if they want the most effective immediate and lasting boost to their states’ economies.”
So, how’s it going?
Census released its 2014 Annual Survey of State Government Tax Collections today, which was not a good day if you’re Sam Brownback, Art Laffer, or Stephen Moore.
Kansas turned in the third worst performance in the US – its tax revenues dropped 3.8%. Below is the chart of total tax revenues for Kansas for the last 20+ years. As noted, Brownback made his comment in 2012 (highlighted on the chart). Tax revenues then slowed significantly in 2013, and turned decidedly negative in 2014:
(Source: FRED through 2013, author’s entry of 2014)
Below are the individual line items for tax categories in Kansas, with the collapse – by 15%, or $499 million – of Income Taxes, both personal and corporate, highlighted.
(Source: Census.gov, author calculations)
Perhaps the rebuttal will be that insufficient time has passed. Perhaps there will be some other excuse. However, as things stand right now, the Brownback tax experiment is looking like somewhat of a failure.
Somewhat? It is a certifiable disaster. Brownback’s rhetoric is predictable, but the repercussions are also predictable.
Don’t these Supply Side cheerleaders know when to quit? It does not work, and only appeared to work for Reagan because he was the first guy to market with the voodoo.
JUST How long will it take for someone eager to defend this latest failed experiment in stupidity by blaming Obama, gay marriage, or Obamacare?
The creeping effects of Sharia Law.
It appeared to work for Reagan because his administration coincided with the beginning of a technology age expanding the economy in a way not seen since we started rebuilding Europe after World War II.
At some point, you think they would figure out, growth is not possible and look for sustainability instead. That is a problem with supply siders. Business sector expansion expansion reaches a saturation point and can’t go on any longer at the rate of speed. Stop pushing for it.
Why does everyone think it’s a failure?
Kansas wanted less taxes.
They passed the appropriate laws.
The tax rate went down.
Kansas citizens pay less taxes.
Kansas (the state) collected less taxes.
Sounds like the definition of success. Maybe you weren’t clear on the objective?
Laffer promised higher tax revenues because of a massive burst of economic growth.
How’s that working out?
From the WaPo on 4/9: “When Brownback, under threat, called Laffer, worried about whether the tax cuts were working as planned, Laffer said he told Brownback to remember why he cut those taxes in the first place. The growth will come. Be patient. “Kansas,” Laffer declared over a five-hour lunch interview in Washington, “is doing fine.””
I’ve said for a while that the tax cuts are working as planned. All those spending cuts they’ve had to make are “why he cut those taxes in the first place.”
Not a failure at all. C’mon, people, what’s the next step for these folks? That’s right, cut services, or, in the long run, starve the government. Seems to be working pretty well.
You sir, are correct … the citizens of Kansas have voted with their eyes open, no chicanery or deception involved, to dismantle their government, apparently believing they will get along just fine, the way that their forefathers, the pioneers who settled Kansas did.
I only ask that when they abandon the gigabit ethernet Google has brought to Kansas City, in favor of the telegraph, they send it in the direction of my community.
This might be the end result of tetraethyl lead in the gas back in the heyday of the auto, or lead in the paint, or some other sort of self-inflicted mass stupidity. Long-term effects of past environmental poisons. That might explain a lot about the state of Bananamerican politics in general.
I wonder what “rebuttal” the author is expecting. Kansas lowered income taxes and revenue from income taxes dropped. Here in WA we vote _against_ stadiums only to have them built anyway.
Looking forward to the rebuttal. :)
Kansas bans welfare recipients from seeing movies, going swimming on government’s dime (wapo http://wapo.st/1Hdzg51 ) as broke as you think
Off course they will claim that it needs more time. But when you ask them for a rational explanation as to why there would be years of delay – all you get is BS or crickets.
The mechanisms whereby tax cuts increase tax receipts are more consumption. When you look at the consumption taxes they have increased by about 30% of the fall in income taxes. So the mechanism whereby tax cuts are supposed to stimulate the economy (increased consumption creating more jobs and therefore more income tax revenue) has been set in motion. It is just that its job creation potential is not having a nearly high enough effect on income tax revenue to compensate for the loss. And jobs are created within a few months of increased consumption not years later – so don’t hold your breath (actually if Brownback, Laffer and Moore would hold their breath that would be fine).
One of the problems why this disaster is so bad is likely that they also cut government spending. So the effects on overall consumption are much less than true stimulus tax cuts. Robbing Peter to pay Paul does not make you richer. The other issue is who gets an increased income from tax cuts. To get an effect with a multiplier > 1.0 you have to target them into the pockets of the consumer class (poor people). Putting more money into the pockets of investor class people do not stimulate demand – it just create bubbles in assets.
The thing that makes the “Laffer Model” such a joke is not that its mechanisms are not plausible (it is basically based on good old Keynesian stimulus tax cuts). It is that the implementation always shots itself in the food by favoring the wrong group (rich people), and that it further kills itself by being combined with good old conservative government cuts. Anybody with half a brain should have realized that the consumption of the government sector is no less stimulating than the consumption of the private sector. So if you cut government spending by 10% and use all that money for tax cuts – there is no net growth for the economy.
The funny thing is that the conservative establishment actually know that cuts in government are bad for the economy overall. After 6 years of “kill the economy and blame Obama” politics where every penny of increased government spending had to be compensated with a reduction of spending; they just passed a deficit increasing doc fix.
So I guess that when the GOP is in charge of congress and likely will take some of the blame for a slow economy, then adding to the deficit is fine. So just looking at their actions you can see that they know exactly how the economy works, but they also know how politics work – and their priorities are not what is good for the country but rather what will help them gain more power.
Yes, DeDude, that was the way it was in 2000-2008 when massive tax cuts, foreign wars and huge deficits were just fine. There is an acronym, I ‘m sure you know it. IOKIYAR
Kansas’ employment picture, per the Current Population Survey, gets more dismal each month:
Year Month CPS
2014 March 2,774
2015 January (552)
So the CPS shows Kansas losing 1,300 jobs in the first two months of 2015. It was a mild winter in Kansas; mid-January to mid-February was Spring-like, with temperatures often in the 50s and 60s, and even a few days of 70s and there was little snow and ice this winter. Tough to blame, I think, the job losses on any winter-weather issues.
To be fair, the Current Employer Survey shows Kansas creating 5,400 jobs in January and February (losses of 4,100 in January plus gains of 9,500 in February). I put more stock in the CPS as it’s a broader sampling (and, for what it’s worth, the CPS is what the government uses to calculate unemployment rates). Kansas’ CPS also reflects what I’m seeing and what I’m hearing from friends and business associates. Stagnant job growth, and when there are there new jobs, they tend to be low-wage and low- or no-benefit type jobs. The way the income tax cuts are structured, they really don’t give an employer an incentive to hire more people. The incentive is to cut labor costs and maximize profits as much as possible. And cutting state spending by what may be close to a billion dollars isn’t helping with demand, either.
Here’s where I took CES and CPS numbers; judge for yourself: http://www.deptofnumbers.com/employment/kansas/
The job picture, combined with school districts closing early and laying off paraprofessionals and teachers; cutbacks in state funding for public universities such as the University of Kansas, Kansas State University and Wichita State University; a steadily deteriorating infrastructure (for example, there’s a bridge in Topeka, Kan., nearing the verge of collapse and needing $17 million worth of repairs, yet funding can’t be found); the prospect of hospitals closing because Kansas has refused to expand Medicaid (two hospitals, one in Independence, Kansas; the other in Fort Scott, Kansas, may have to close soon if they can’t merge with other hospitals), and a state government now controlled by right-wing Christian fundamentalists hostile to anything that isn’t based in their version of bibilical events and doctrine has helped me make the decision to leave Kansas this summer. Kansas is not doing well economically and its social values represent the Dark Ages more than the 21st Century. Time to leave.
With an intellectual giant (and noted economic expert) Sam Brownback in charge? Get the f*** out. More liberal bias.