Trump budget mirrors disastrous Kansas plan
Policy makers, government officials and journalists from Kansas are going out of their way to point at the state’s fiscal crisis as an example of what awaits the rest of the country if President Trump’s proposed budget is adopted by Congress.
While that’s unlikely — Sen. John McCain, R-Ariz., called Trump’s budget “dead on arrival” when it was released as an outline earlier this month — it’s worth contemplating why the Trump administration would promote a tax and spending plan similar to the one that has left Kansas in a shambles.
What they have in common is Arthur Laffer, the guru of “supply-side economics” since the Reagan era and one of the architects of a tax plan Kansas Gov. Sam Brownback started promoting in 2012 and persuaded the legislature to enact in 2013.
The “Laffer curve” illustrates a theory that lower taxes stimulate economic activity and lead to more revenues. Brownback bit on this theory — hard. As part of the state’s largest-ever tax cuts, Kansas slashed its business tax rate down to zero percent.
Economic growth from tax cuts never materialized, saddling the state with massive budget hole and leaving schools drastically underfunded.
“But tax cuts were only half of the Brownback experiment,” the Kansas City Star noted in an editorial critical of Trump’s plan. The state reduced funding for its social safety net — just as Trump is proposing. Trump’s budget looks to cut federal spending by $3.6 trillion over the next decade, slashing funding to many agencies and programs, including Medicaid.
The poverty rate in Kansas worsened; with no revenue windfall to absorb the demand for more services. The state ended up raising its sales tax rate, now one of the highest in the nation. Meanwhile, Democrats and Republicans are seeking to rescind business tax breaks as the state struggles to balance it books.
The linchpin of the Brownback plan, as with Trump’s, was a huge cut to taxes paid by limited liability companies (LLCs) and so-called “pass-through” businesses. Eliminating the state tax on most, if not all, of an independent business owner’s income was supposed to spur investment and create new jobs.
When Brownback campaigned for re-election in 2014, he pledged his tax plan would add 100,000 new jobs over four years. But as The Guardian’s Dominic Rushe reported, by March of this year, the state had added just 12,400 private-sector jobs.
Despite the cautionary tale arising from the plains, Trump’s key economic allies are insisting that the biggest tax cuts in history will pay for themselves by stimulating economic growth.
We’re more apt to listen to the people who have suffered through this policy failure.
“Take it from those who live and work in Kansas,” the Star’s May 23 editoral concludes. “This doesn’t end well. America has been warned.”