Having failed on, well, just about everything he’s attempted so far, President Trump and Congress will now apparently turn their attention toward “tax reform,” i.e. tax cuts for the wealthy – the Republican panacea for all that ails us. Of course, we’ve already been treated to the worthless, utterly discredited supply-side, trickle down nonsense that whatever is proffered will, of course, pay for itself with growth.
So said Treasury Secretary Steve Mnuchin (April 2017):
“The plan will pay for itself with growth,” Mnuchin said at an event hosted by the Institute of International Finance.
Luckily for us, we already know that a tax cut plan that will pay for itself is a unicorn, a fantasy that cannot and will not ever come to pass. We had a multi-year “experiment” in the state of Kansas that its governor, Sam Brownback, trumpeted as a “shot of adrenaline” to the state:
Wrote Brownback (July 2012, emphasis mine):
In May, the Kansas Legislature passed and I signed the largest tax cut in state history, eliminating state income taxes on small businesses and reducing the tax burden on hardworking Kansans. […]
Our new pro-growth tax policy will be like a shot of adrenaline into the heart of the Kansas economy. It will pave the way to the creation of tens of thousands of new jobs, bring tens of thousands of people to Kansas, and help make our state the best place in America to start and grow a small business.
Brownback said his tax cuts would be a “real live experiment” (June 2012):
Topeka — Gov. Sam Brownback on Tuesday described his tax cuts as a “real live experiment,” which drew the disapproval of a group of fellow Republicans.
So, five years on, how’d it go with Brownback’s “real live experiment?”
Well, in June of this year, Kansas Republicans reversed course and undid most of what they’d done five years earlier because it had wrecked the Kansas economy (June 2017):
In a decisive repudiation of conservative tax-cutting philosophy, Kansas Republicans voted this week to reverse deep tax cuts enacted by Gov. Sam Brownback (R), a move that lays bare the challenges of one-party control and the risks for Republicans in Washington pursuing a similar policy at the national level. […]
In recent years, Kansas has served as a real-world example of what can happen if tax cuts fail to deliver promised growth. Since Brownback began cutting taxes in 2012, the pace of economic expansion in Kansas has consistently lagged behind that of the rest of the country. Last year, Kansas’s gross domestic product increased just 0.2 percent, federal data show, compared with 1.6 percent nationally. At the end of 2015, the state was in what many economists would describe as a recession, with the economy shrinking for two quarters in a row.
Here’s an excellent recap of what happened with Kansas:
- In 2012, Kansas Governor Sam Brownback (R) sought to boost the economy by sharply cutting income taxes across the board.
- Under his plan, the tax rate on pass-through business income fell to 0. The idea was to boost investment, raise employment, and jump-start the economy.
- This type of supply-side trickle-down theory has been proposed by Ronald Reagan, George Bush, and many others.
- The program in Kansas served as a lab test for how supply side tax cuts may work at the federal level. In Kansas, however, these tax cuts proved unsuccessful.
- The Kansas economy did not grow faster than neighboring states, the country itself, or even Kansas’ own growth in previous years.
- The experiment with tax policy was such a failure that a Republican controlled legislature not only voted to raise taxes, but did so over the veto of the governor.
There is no part of the Kansas experiment that we should try to replicate as a nation. Kansas failed spectacularly, and we should be making every effort to avoid making the same mistakes.
I’d be remiss if I didn’t note that Brownback had been advised on his cuts by the father of supply-side gobbledygook, Art Laffer. And, speaking of Laffer: