It cannot be said that this year’s legislative session has been remarkably productive or representative of the best democracy can do, but it did follow the cycle of typical legislative activity, with the notable exceptions of budgets and taxes. Our state legislators developed some new ideas, recycled old ones and discovered, particularly regarding fiscal matters, “new” truths.
A new idea? According to Sen. Mary Pilcher-Cook, R-Shawnee, the federal Affordable Care Act’s mandated purchase of health insurance by the working uninsured forces the state of Kansas to create a tax on participating health insurers (to be passed on to premium payers, no doubt) to offset the costs (undisclosed) imposed on the state by the ACA. What these costs might be are anybody’s guess since the state of Kansas chose not to create a state-managed health insurance exchange, nor to embrace the expansion of Medicaid and its large federal subsidy providing a lifeline to many rural health care providers whose services to many low-income Kansas elderly are vital.
An old idea? The most obvious and unsupportable is that cutting income tax rates creates economic growth. It is a truth of market economics that high taxes stifle economic growth. That’s very true when tax rates are confiscatory and erode capital, because the burden can’t be passed on to someone else in higher prices. The reverse is not true – and especially not true when income tax rates are moderate, as they have been since the Graves administration in Kansas.
As the current governor and his legislative allies have discovered after five years walking the walk and talking the talk, dropping income tax rates for small businesses and professionals only puts a little cash in the hands of the owners. It doesn’t prompt notable growth and expansion. Only increased demand does that, and increased demand comes from people who have more to spend.
Sign Up and Save
Get six months of free digital access to The Wichita Eagle
Because the income tax cuts lightened the burden very little for most Kansans, and property and sales taxes went up for many, expendable income and demand have gone nowhere.
And a new truth (or perhaps just a rediscovered truth)? Cutting taxes is so easy – and cutting spending is so hard. The people’s champions – those who pay homage to Missouri billionaire Rex Sinquefield and the Koch brothers and anti-tax crusader Grover Norquist – appear to be emperors without clothes. If they were real apostles of the conservative faith, they’d have no reservations about cutting half a billion dollars out of the general fund budget to match the drop in revenue. After all, whatever government costs it’s too much, government does the wrong things, it transfers resources to the undeserving, and it only incentivizes bad behavior.
Instead of slashing spending and goring the oxen of many “cut them, not me” constituents, our enlightened lawmakers prefer raising consumption taxes.
The result? Less spending by the people who make the cash registers ring, further reducing demand for those small-scale entrepreneurial types and their prospects for economic expansion.
It is said that the definition of insanity is the repetition of past unsuccessful behavior in the expectation of a better future outcome.
Mark Peterson teaches political science at Washburn University.