Last year, I detailed Kansas’ roadmap for growth through comprehensive tax reform. Since then, the Center for Budget and Policy Priorities (CBPP), a left-leaning think tank funded by George Soros, lambasted Kansas’ significant pro-growth tax policy changes. These widely reported yet patently false claims fueled the opposition’s efforts to discredit the correlation between lower tax rates and economic growth. Below are five false claims that were published by the CBPP, followed by the facts that the organization chose to ignore or distort.
False Claim #1: Deep income tax cuts caused large revenue losses.
Facts: According to Kansas Interim Budget Director Jon Hummel, Kansas ended fiscal year 2013 with an 11.6 percent ending balance (3 percent more than what is required by state statute) and there is currently $700 million in the state’s reserve fund. In February 2014, state tax receipts were at a ten-year high and revenue for the current fiscal year surpassed projections by $7.4 million.
Supporting evidence: “Static” economic forecasting models do not take into consideration the growth that is associated with lower tax burdens. The chart below clearly shows how, over time, no-income tax states outperform high income tax states.
False Claim #2: The large revenue losses extended to and deepened the recession’s damage to schools and other state services.
Facts: The recent Kansas Supreme Court ruling that called for an increase in school funding was the result of a funding formula that was created by the previous administration, not the current pro-growth tax cuts. There is no proof that the quality of education improves with more spending.
Supporting evidence: This recently released policy study by the
False Claim #3: The tax cuts delivered lopsided benefits to the wealthy.
Facts: Kansas’ tax cuts benefit entrepreneurs, small businesses, farmers, and other working men and women who are not in the top 1 percent of earners.
Supporting evidence: In every case, the overall economic strength of no-income tax states far surpasses the highest income tax states, as shown in the chart below.
False Claim #4: Kansas’ tax cuts haven’t boosted its economy.
Fact: Kansas’ economy already is showing several signs of improvement
Supporting evidence: According to this report, Kansas’ general revenue receipts increased nearly $30 million in 2013, personal income increased almost 3 percent over the 2011 level (with stronger projection for the next two years), and unemployment is well below the national average.
False Claim #5: There’s little evidence to suggest that Kansas’ tax cuts will improve its economy in the future.
Fact: Static analysis, which is the standard form used by Kansas government, is misleading. It does not take into account the dynamic changes in personal earnings and spending and business investment that are reasonable to expect.
Supporting evidence: According to a recent Kansas Policy Institute study, for the years 2013 – 2018, Kansas tax policy reductions will create 33,000 new jobs, add more than $300 million in new business investments, and provide $1.6 billion more in disposable income. In addition, state and local coffers will see $395.9 million in new revenue.
There are at least two good examples from America’s heartland that support the correlation between lowering income tax burden and growth. In the last four years, Wisconsin Governor Scott Walker cut taxes by close to $2 billion dollars and the Badger State now enjoys a comfortable $912 million budget surplus. More evidence can be found in Michigan, where in 2011 Governor Rick Snyder reduced the corporate income tax to a flat of 6 percent: overall, a $1.7 billion tax cut. This year, Michigan is operating with a budget surplus of $971 million.
Visionary state leaders who are interested in creating 21st century economies are turning away from failed high tax policies in favor of environments that support job creation and higher salaries. And as far as the false claims made by Kansas’ tax and spend opponents, I offer the insightful words of Mahatma Gandhi said, “First they ignore you. Then they laugh at you. Then they fight you. Then you win.” Clearly, Kansas is setting the stage to win.
