Eagle editorial: Will tax-cut plan work?
04/18/2014 6:42 PM
08/08/2014 10:23 AM
Kansans can’t be sure yet whether Gov. Sam Brownback’s 2012 tax-cut plan is working or is an unaffordable, unsustainable flop. But it clearly isn’t the economic “shot of adrenaline” it was promised to be.
“This has been a tough season coming out of this recession,” Brownback told an Emporia crowd last week, proudly saying that while his predecessor ended a fiscal year with less than $1,000 in the bank he anticipates the coffers to contain $500 million when this fiscal year ends June 30.
That’s an impressive achievement, all right – though the governor fails to credit the same predecessor’s sales-tax increase (which he criticized at the time) for helping replenish the reserves.
Brownback also can take satisfaction from state economic experts’ latest projection that overall tax revenues will be higher than earlier estimates. The administration points with further pride to new-business filings and the 4.9 percent unemployment rate. Kansans already are seeing such data used to support the governor’s re-election campaign.
The problem is that the revenue reports are 6 percent less than last year, because of those sharp income-tax reductions that took effect for 2013. Meanwhile, Kansas is lagging its neighbors and the nation in most economic measurements.
BloombergBusinessweek looked at the state’s predicament last week in an article headlined, “Kansas Tries to Shrink Its Way to Prosperity,” noting that Brownback’s 2012 income-tax cut was the biggest the nation had seen since the 1990s in percentage terms.
“The jury is still out on whether lower taxes will stimulate businesses to expand and hire over the long term. But the immediate effect has been to blow a hole in the state’s finances without noticeable economic growth,” wrote Bloomberg Businessweek economics editor Peter Coy, citing legislative research showing Kansas on track to see a $900 million shortfall by fiscal year 2019.
The state constitution demands a balanced budget, of course, so the Legislature and governor (whoever that is) will have to stave off that fate with more budget cutting or – far less likely – tax hikes. And future efforts to “keep your spending under control,” as Brownback’s interim budget director blithely put it last week, would follow years of state cuts to education, courts, social services and other priorities that once anticipated their funding would be restored as the economy rebounded.
Former longtime state budget director Duane Goossen told BloombergBusinessweek: “The tax cuts don’t pay for themselves. That just is not happening.”
And though a TV ad declares, “We got it done,” the bill on Brownback’s desk promising $73 million more for schools and $78 million in property-tax relief is only the narrow first response to the school-finance lawsuit. The courts’ determination of whether state funding has been unconstitutionally low as well as inequitably distributed is still to come.
As BloombergBusinessweek noted, further budgets also will have to account for not only the falling revenue and any court-ordered school funding but rising Medicaid costs and simple inflation.
So the true test of the historic tax cuts remains ahead, beyond the administration’s intentionally abbreviated gaze.
For the editorial board, Rhonda Holman