Steve Kraske: State tax cuts have had enough time to work

Gov. Sam Brownback wants more days, more months and maybe even more years.

“These things take some time,” Brownback said not long ago when asked whether his king-size income tax cuts have had the desired effect.

The key, he said, is patience.

Arthur Laffer wants more time, too. He’s the philosophical architect of the Kansas income tax cuts.

“You have to view this over 10 years,” Laffer said. “It will work in Kansas.”

But that’s one point of view. As Kansas struggles with higher sales taxes and slashed budgets, I wondered what economists who focus on this stuff would say.

It’s been nearly three years since the state slashed income tax rates and took scores of businesses off the tax rolls. How much time do we have to wait for the “shot of adrenaline into the heart of the Kansas economy” that Brownback promised?

I randomly called half a dozen economists from around the country. They’re at major think tanks and major universities far from Kansas, and they don’t have any dog in the Kansas dispute. I asked this: Have the tax cuts had enough time to work?

Economists don’t agree on much, but they agreed on this, and they were unanimous: Yes, the tax cuts have had plenty of time. No question about it:

▪  “More than 33 months have passed since January 2013. That’s a long time,” said Charles Ballard, who teaches economics at Michigan State University. “If the tax cuts were ever going to have a major effect, it would have happened by now. I would not have expected a large effect in any event.”

▪  “Pushing on three years would be a very long time,” said Mitchell Kane, a professor of taxation at New York University. “If a policy had no effect or bad effects through that length of time, it would be difficult to see it turning around at that point.”

▪  “The short-term consequences should have shown up by now,” said George Yin, a professor of law and taxation at the University of Virginia and former chief of staff of Congress’ Joint Committee on Taxation, one of the most influential tax positions in the country.

▪  “Three years is enough time to start seeing that impact,” said Don Boyd, director of fiscal studies at the Rockefeller Institute of Government in New York.

Tax policy is complicated. Very complicated. National and regional economic trends affect any one state’s attempt to boost its prospects. Business owners don’t automatically flock to a tax-cut state because they understand that if a state slashes tax rates, services might suffer.

So a trade-off quickly looms. Cheaper taxes versus lousier roads or lousier schools.

Then there’s this: What else is Brownback going to say about the lackluster job growth and a budget in shambles? He’s buying time by saying he needs more of it.

From a purely political standpoint, Brownback can ill afford to walk away from his tax “experiment” (his word). Distancing himself from his own plan would be akin to President Obama saying adios to the Affordable Care Act.

Signs that the Legislature is out of patience are everywhere these days.

Sen. Jim Denning, R-Overland Park, said the tax cut is “not producing what I thought it would produce.” Other conservative Republicans tell me much the same thing. They’re giving the experiment until January. If there’s no turnaround, they’ll get to work on revisions.

Patience has its limits.

This story was originally published October 26, 2015 at 7:05 PM with the headline "Steve Kraske: State tax cuts have had enough time to work."