Politics & Government

Brownback stands by tax cuts as long-term economic strategy

Sam Brownback waves to a cheering crowd in Topeka after he was re-elected governor in November.
Sam Brownback waves to a cheering crowd in Topeka after he was re-elected governor in November. File photo

In his office at the Statehouse, Gov. Sam Brownback picks up a framed, autographed picture of himself posing with former heavyweight champions Leon Spinks and Mike Tyson, their fists in fight-ready position.

“You a boxing fan at all?” he asks. The picture was taken a few years ago in Wichita. It’s one of several pieces of sports memorabilia that dot his office.

Asked if he ever tried his luck in the boxing ring, he smiles and says politics is a rough enough sport.

Brownback survived a tough re-election fight, besting Democrat Paul Davis by 4 percentage points but with less than 50 percent of the vote.

“The national narrative tried to get me this election cycle from the left,” Brownback said in an interview with The Eagle last week. “I mean, they were just – MSNBC, the New York Times and Washington Post were all on me. ‘You’re trying to do too much in Kansas.’”

“I don’t want to say unfairly,” he continued. “I’m just saying that I was their target. They just decided we really want to go at this Kansas governor’s race, because we’ve done a lot of things here. But at the end of the day, people sorted through it and I got re-elected and I’m delighted to have a chance to serve.”

He hasn’t had much time to savor his victory. He announced $280 million in budget cuts and transfers last week to close a budget hole through the end of the fiscal year in June.

Because Brownback relied primarily on one-time transfers from dedicated funds to address the problem for six months, the state faces a much bigger deficit next year. It is projected at $648 million by the nonpartisan Legislative Research Department.

Brownback said there’s no easy fix, but Democrats say the solution is obvious: Revisit the tax cuts.

“You would think,” Senate Minority Leader Anthony Hensley, D-Topeka, said with a laugh.

The tax policy championed by Brownback reduced individual income tax rates and eliminated income taxes for the owners of 190,000 businesses.

Moody’s and Standard & Poor’s cited the tax cuts when they downgraded the state’s bond ratings in the wake of plunging revenue. And Legislative Research has pointed to the tax cuts as one of the main causes for the looming budget shortfall.

Although the governor has not ruled out changing tax policy, he’s unlikely to reverse course on the cuts. And he has not expressed willingness to slow or freeze additional cuts planned over the next four years.

Brownback agreed that lowering tax rates contributed to lowering the state’s revenue. He said he stands by the policy decision as long-term strategy to spur economic growth.

“What else are you going to do?” he said. “Are you going to try raising taxes more? Because we’ve tried that.”

“We had 35 years of not much growth and going from six congressional districts to four,” Brownback said. “You’ve got 35 years of data that says the way we were going wasn’t producing any good long-term results for the state, for the people. We’ve gone on a different track. I believe it is working.”

A ‘purposeful strategy’

Brownback points to the state’s job growth as proof.

The state gained about 13,800 non-farm jobs between October 2013 and October 2014, according to the U.S. Bureau of Labor Statistics. The state’s unemployment rate has dropped from 5.2 to 4.4 percent.

But this job growth hasn’t happened in a vacuum. The United States is on pace this year to have its best job growth since 1999.

“You’ve got a series of factors that things are happening – positive – but I don’t know what you can allocate to either side. We are still part of a national scene,” Brownback said, regarding the role the national recovery and his own policies have played in growing jobs in Kansas.

“I can’t parse it out for you,” he said. “But if you’re a high tax state we know what that looks like for us because we’ve got a 35-year experience of it. And so I’m saying, yes, we did this. It is a purposeful strategy. It takes time for it to work. It is working.”

The Brownback administration has tried to rebut the notion that the tax cuts are solely responsible for the state’s budget woes, contending that the Kansas Supreme Court’s order for more school funding and increased costs to Medicaid caused by the Affordable Care Act played a role.

Secretary of Revenue Nick Jordan has also pointed to changes in federal tax policy that influenced investor behavior, causing the state’s gross income – the total income of everyone in the state – to be lower than expected this tax year.

‘State of denial’

Joan Wagnon, the chair of the Kansas Democratic Party, said it makes her head spin that Brownback “can continue down this path in such a state of denial.”

Wagnon served as revenue secretary during the administrations of Democrats Kathleen Sebelius and Mark Parkinson. She said the tax cuts will likely never produce the kind of “adrenaline shot” for growth that Brownback promised and revenue will continue to dwindle.

She said the governor is either being dishonest or, perhaps more troubling, doesn’t understand the scope of the problem.

“I’m not sure he’s getting good advice. But it would be very difficult for anyone who’s been around more than 35 minutes not to know that we have a serious revenue problem,” Wagnon said. “And the scope of the next budget cut is not going to be as easy as this recision or just grabbing highway money.”

Rep. Steve Huebert, R-Valley Center, said it’s unlikely lawmakers would undo the tax plan but said delaying the additional tax cuts might be an option.

“I think there’s growing sentiment that if necessary we could put some things on hold,” he said. “I’ve already told people I could vote for that.”

Jeff Glendening, the state director for Americans for Prosperity, a conservative advocacy group with ties to Wichita-based Koch Industries, said the state needed to stay the course with the tax cuts. He also said the state should have originally paired the tax cuts with an equal cut in spending.

“It takes a while to turn the Titanic. And the state budget is a Titanic,” Glendening said. “Getting those businesses into the state takes time. We can’t just abandon ship after a very short period of time.”

High negatives

Mark Dugan, who managed the governor’s re-election campaign, said last week that Democrats had tried to make the election a referendum on Brownback’s policies, specifically the tax cut, and that voters had validated those policies.

A clear majority of Kansas voters told Edison Research, the firm that conducts national exit polls, that Brownback’s tax cuts had hurt the state – 53 percent, compared with 41 percent who said they had helped the state.

“And yet he still won,” Joe Lenski, Edison’s executive vice president, said at a post-election forum at KU’s Dole Institute of Politics last week.

“Even though the Republican Party was under water – their candidates had very high negatives – the Democratic negatives and the Obama negatives were even higher,” Lenski said. Exit polls showed 66 percent of Kansas voters disapproved of President Obama’s job performance.

Dugan pointed to another statistic from the exit polls as a key factor in Brownback’s victory: 64 percent of Kansas voters believe that government does too much.

Those voters may get a state government that does less in the coming months and years.

In the short term, Brownback proposed sweeping $96 million from the highway fund and $55 million from the Department of Health and Environment, money from a Medicaid pharmacy rebate program created as part of the Affordable Care Act.

He also took $41 million from the state’s pension fund, which the Kansas Coalition of Public Retirees referred to as a “broken promise” in an e-mail to members.

Brownback said he wanted to minimize the impact to education with his short-term budget fix, but he has signaled plans to make changes to the school finance formula in the future.

Some of the governor’s cuts announced this past week will go into effect automatically, but about $222 million require legislative approval.

Senate President Susan Wagle, R-Wichita, complained in an e-mail that the governor “put the Legislature in a difficult position.”

The governor said he wanted to defer to the Legislature in seeking a budget fix.

“At the end of the day, the Legislature, that’s their primary power is the power of the purse,” the governor said. “And I’ve found that’s a good process. You get a lot of heads in it. It’s messy … but at the end of the day it tends to produce a pretty good product that’s reflective of the people’s values.”

Reach Bryan Lowry at 785-296-3006 or blowry@wichitaeagle.com. Follow him on Twitter: @BryanLowry3.

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