Kansans should thank those courageous state representatives, a coalition of Republicans and Democrats, who in the last hour of the last day of the recent legislative session withstood the tempting siren song of “return the windfall.” Even so, every candidate seeking state office this year will face a headwind of windfall politics.
What exactly is this “windfall,” you ask?
Generally, when federal and state income taxes are connected, as they are in Kansas, a tax cut at the federal level could result in a revenue gain at the state level. Last February, the Kansas Department of Revenue offered “rough approximations” that the bump in Kansas could be as much as $138 million in the upcoming fiscal year. That figure represents at most a 3- to 4-percent increase in state income tax revenues or less than 2 percent of state general fund revenues.
The possibility of this bump prompted a frenzied cry by some legislators and special interests to “return the windfall!” Did those shouting out know how much should be returned? No. Did they know which taxpayers were actually affected? Of course not. Did they know to whom money should be returned? Not really.
What they came up with at the last minute was the height of fiscal irresponsibility, a cockamamie bill that threw a bunch of money at a dozen favored benefactors along with the fantasy of telling voters the windfall would be returned. Thankfully, the bill was defeated.
A bit of Kansas windfall history may have relevance here.
Less than two weeks before Election Day 1986, Republican Mike Hayden and Democrat Tom Docking were locked in a tightly contested race for governor. President Reagan had just signed major tax reform legislation. At a candidate forum in Johnson County, both candidates hastily responded to a question that any windfall accruing to the state as a result of reform should be returned to taxpayers. Their rejoinder gave birth to “return the windfall” as a potent political force.
Hayden won the governorship that year, and windfall demands would complicate his management of state finance for the next three legislative sessions. By Year 3, taxes had been cut, but the lengthy debate had exhausted many taxpayers, and the result fell short of their heightened expectations.
Current candidates for state office seeking advantage in windfall politics should thus be forewarned. The amount of any so-called windfall will be guesswork, particularly as taxpayers adjust behavior in response to state or national action.
Whether a taxpayer benefits or not from federal tax changes will be unknown. So returning any windfall will involve a calculation of guesswork with unknowns. That is not a great way to make state tax policy, and lawmakers should not expect political credit for their work.
More importantly, most Kansans remember seven years of financial mismanagement under former Gov. Sam Brownback and will be wary of candidates promising new tax cuts under the guise of returning the windfall. Voters will be looking with more favor toward candidates concerned about the condition of state finance.
Has the state stopped skipping pension payments? Are highway funds no longer being swept? Is the state meeting statutory requirements for general fund balances? Has the state’s credit rating been restored? Has the state met its constitutional obligations for funding schools? Has the damage to essential services been repaired?
These are consequential questions for state government, and voters should beware of simple-minded “windfall politics” this election year.
H. Edward Flentje is professor emeritus at Wichita State University.