August 26, 2014

Stop digging budget hole

Gov. Sam Brownback and his campaign officials apparently don’t believe in the old adage: If you find yourself in a hole, stop digging.

Gov. Sam Brownback and his campaign officials apparently don’t believe in the old adage: If you find yourself in a hole, stop digging.

Not only do they want to keep digging the state into deeper budget problems, they are appalled by a proposal by Democratic gubernatorial candidate Paul Davis to postpone future tax cuts.

How dare Davis be fiscally responsible?

The tax cuts approved by the Legislature and Brownback eliminated nonwage state income taxes on about 190,000 businesses and collapsed Kansas’ three individual tax brackets into two. The top rate dropped from 6.45 to 4.9 percent starting in 2013, and the lower rate went from 3.5 to 3 percent. The two rates are scheduled to phase down to 3.9 and 2.3 percent by 2018.

Rather than acting like “a shot of adrenaline into the heart of the Kansas economy,” as Brownback promised, the tax cuts have drained the state’s cash reserves. Tax collections last fiscal year were more than $700 million less than the previous year.

As a result, the state may not have enough money to make it through this fiscal year without spending cuts. Then the budget problems look even worse, as the state may have to cut more than $200 million just to balance next year’s budget, let alone restore the cash reserves.

Faced with this reality, Davis proposed freezing the tax rates at their 2015 levels: 4.6 percent for the top bracket and 2.7 percent for the lower bracket. He wants to keep the rates at those levels until the state restores education funding to a prerecession level.

A report released last week by the Kansas Legislative Research Department said that this proposal would result in $20.5 million in additional tax revenue collected in fiscal year 2016 (above what would have been collected if tax rates dropped as scheduled) and $735 million in additional cumulative tax collections by the end of fiscal year 2019. Brownback’s campaign quickly pounced.

John Milburn, the governor’s campaign spokesman, called Davis’ plan “appalling,” saying that “Kansans should be outraged.” Senate Majority Leader Terry Bruce, R-Hutchinson, who requested the KLRD report, proclaimed: “A tax increase on low-income workers does not reflect Kansas values.”

Setting aside the question of whether postponing future tax cuts should be considered a tax increase, what is Brownback’s plan for dealing with budget shortfalls?

Brownback predicted that job growth would take care of the shortfalls (highly unlikely) and said that he wants to continue to reduce income tax rates if he is re-elected.

Neither candidate is being honest with voters about the difficult steps that may be necessary to cover the shortfall. Davis’ proposal to freeze future tax cuts would help keep the budget hole from becoming deeper, but it wouldn’t do much to fill in the hole. Brownback’s solution is to ignore reality and keep digging.

For the editorial board, Phillip Brownlee

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