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Saturday, June 10, 2017

Kansas Republicans abandon Brownback; raise taxes over his veto

Remember Kansas's great tax-cutting experiment under Governor Sam Brownback? (Me, sarcastic?) As always in Arthur Laffer and Stephen Moore La-La Land, cutting taxes leads to economic nirvana. Except when it doesn't, and it didn't in Kansas.

I recently wrote about the idiocy of Investor Business Daily's criticisms of California, and Paul Krugman carried the ball further, citing me and bringing in a comparison with Kansas (Brownback and Jerry Brown both took office in 2011). As Kansas cut taxes and California raised them, Kansas managed to raise employment by 5% from 2011 to 2017, whereas California's job growth was a rather more impressive 15% over the same period. As it turns out, Kansas's problems weren't limited to poor job growth.

As Alexia Fernandez Campbell points out at, one major change "eliminated taxes on owner-operated businesses, known as pass-throughs." This created an incentive for people to switch from being employees to being separate businesses providing exactly the same services. Tax avoidance reduced tax revenue by an estimated 1.7%, while the total reduction in tax revenue was 8%. With losses of this magnitude, Kansas ran into persistent budget trouble. For this, it was rewarded by Standard & Poors with credit downgrades in 2014 and 2016. By contrast, California saw its credit upgraded by the rating agencies several times. Both states now have an AA- rating from S&P, which is the fourth-best rating but below average for U.S. states.

By this week, the Republican-supermajority Kansas Legislature had had enough. Overriding Brownback's veto, the legislature passed a repeal of most of Brownback's tax cuts, including the pass-through provision mentioned above. Hopefully the state will now be able to begin repairing its six-year fiscal nightmare.

Do I have to tell you that Laffer and Moore are the main advisers behind Trump's tax plan, too?

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