With $2 billion surplus on books, Kansas politicians drool over tax cuts. They should think twice.
Despite a record surplus, writes Clay Wirestone, the state should be careful about cutting taxes. (Getty Images)
Kansas Gov. Laura Kelly and the Legislature both want to make a big mistake.
The only question is whose will cost more.
The state has $2 billion in the bank, thanks to robust tax collections. That means both the Democratic governor and Republican legislative leaders have decided that Kansans need tax cuts. The governor, to her credit, has a reasonable list of asks. She wants to immediately eliminate the sales tax on food, add a tax holiday on school supplies and ease the tax burden on Social Security. Republicans have a broader list of potential targets, including Social Security income, property valuations and income tax.
Both sides should pause and think twice. Either batch of proposals will immediately slash state revenue. Kelly’s plan costs $500 million over three years. Income tax changes would cost far more. Meanwhile, our state and nation could enter a recession this year. That means tax collections will drop, and demand for state services will rise.
That makes the 2023 session an especially risky time to cut taxes.
The Brownback example
Once upon a time, legislators in Kansas understood this.
In 2016, despite the election of Donald Trump to the White House, our state elected a passel of moderates to the Statehouse. They joined with Democrats to end Gov. Sam Brownback’s tax “experiment,” which had opened yawning deficits and damaged state services.
They understood that without sufficient tax revenue, a state withers. One-time charges and tricky accounting can only carry you so far.
Thanks to changes made in the 2017 session, Kansas has righted its fiscal ship. Yes, that means we have more revenue coming in than expected. But this mad rush to broad-based cuts is a recipe for disaster. We need to be small-c conservative with our state’s resources, not committed to an anti-tax ideology that already made us the laughingstock of the United States.
The same extremists who made the case for the Brownback cuts haven’t apologized or backed down. That makes me especially concerned about what bills might make it through the Legislature.
Economist Art Laffer, for instance, simply made fun of Kansas’ experience.
“When your biggest criticism of me is Kansas, I mean, come on,” he told the Washington Post in November. “What the hell is Kansas? There was no cataclysm. It was boring old Kansas before and after.”
Dave Trabert, CEO of the rightwing Kansas Policy Institute, wrote a book hilariously titled “What Was Really the Matter with the Kansas Tax Plan: The Undoing of a Good Idea.” The same “institute” now includes a blog post on its front page making the case for a flat tax (a single tax rate charged to everyone, regardless of income).
They want to run full speed ahead, damn the consequences.
On the table
Only two tax policy proposals should be under discussion now.
First, the sales tax on food should be eliminated. The tax is regressive, which means it affects the poorest Kansans the most. Wealth-worshipping Republicans don’t want to speed the process along, but they should anyway. Revenue would be reduced — which the fiscal conservative in me doesn’t like — but voters demanded it yesterday.
Secondly, if ultra-conservative Republicans decide to push a flat tax, moderate Republicans and Democrats should demand a price. Agreeing to abandon a progressive tax rate in favor of a regressive one would be a titanic shift in state policy. But a grand bargain could be reached if everyone worked together.
In return for a single rate, the Legislature should:
- Expand the Medicaid program for low-income Kansans.
- Guarantee the full funding of state education, at the K-12 and college levels.
- Ensure the public pension fund, KPERS, keeps paying the benefits it owes.
- Repeal the cruelly misnamed HOPE Act, which limits access state aid for the poorest Kansas.
- Expand access to child care by increasing assistance to both parents and providers.
- Retain a rainy day fund for the next economic downtown.
- Include targeted exemptions and deductions for those in greatest need.
Finally, the ultimate tax rate must be sufficient to support all of these programs and goals in perpetuity. Not for a year or two or three. For as long as Kansans need them.
Why make these changes? Simple. A flat tax would hit poorest Kansans hardest. They already suffer under state laws that penalize poverty (see the HOPE Act above). Programs supporting these families must be expanded and funded. If ultra-right Republicans can figure out how to do that while instituting a flat tax, they should share the details.
I imagine that moderate Republicans and Democrats would be interested in seeing how that math works.
Taxes and spending
Few politicians speak frankly about tax policy. Democrats and Republicans alike want voters to believe they can get something for nothing. No one’s the wiser, until the bills come due.
In Kansas, we learned that lesson the hard way.
Kelly knows this. Her reelection campaign depended on tying her opponent, Attorney General Derek Schmidt, to Brownback’s policies. It perplexes me, therefore, to watch her champion a package of tax cuts for the upcoming session. Yes, we’re in a stronger position to afford those cuts than before. But the governor staked her claim to leadership on being fiscally cautious.
Republicans should know this, too. The toxic Brownback brand still damages their candidates. Their favored lobbyists, such as Trabert, resort to clammy palmed doublespeak when faced with regressive tax policy’s real-life consequences. Enacting their favored legislation, without careful compromise and tailoring, will harm both the state and their political futures.
I’m under no illusions. Kelly and the Republicans likely won’t agree on immediate food tax relief. I doubt either side wants to embrace my grand bargain. They will argue, vote, veto and vote again.
This state deserves better than the well-worn wheel ruts of tired old tax debates. If lawmakers insist on making changes, they should help the neediest among us. The wealthy and well-heeled can look after themselves.
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