The conventional wisdom on Kansas tax reform is wrong, according to Jake Novak, a CNBC columnist. He hopes Washington will learn from the Sunflower State’s mistakes. Novak gets what most local media miss: Kansas tax cuts weren’t the problem; the state had a spending problem.
He writes the Trump administration and Congress can learn valuable lessons from the Kansas tax cuts, but first, they need to know the facts.
“They must learn that the Kansas fiscal debacle isn’t the result of the lower taxes alone. In fact there’s plenty of evidence the lower taxes on their own were beneficial,” he writes. “…The real fiscal problem plaguing Kansas is runaway spending.”
Novak dispels the myth that Gov. Sam Brownback slashed the state budget, by noting that the state increased spending every year of Brownback’s term except 2013. In fact, he writes, Brownback “oversaw a budget that spent 34 percent more per person in 2014 than states without income taxes.”
He notes the plan that passed wasn’t the same as the one Brownback proposed. In particular, the 2012 tax reform didn’t eliminate deductions and loopholes. Novak takes issue with eliminating income taxes on pass-through income, perhaps not realizing that the march-to-zero would have eventually brought everyone to that same income tax rate of zero.
“While cutting taxes can lead to growing tax revenues when more jobs are created and investment is encouraged, those increased revenues won’t necessarily come in overnight,” he writes. “The only responsible thing to do is cut government spending in the first year or two after tax cuts are enacted to avoid state deficits and keep essential services running.”
It’s a the myth that Kansas slashed state spending to the bone following the tax reform, and it’s a challenge the federal government won’t have. By state statute, Kansas is prohibited from running a deficit. The feds simply print money until revenues start growing, though Novak doesn’t recommend that the feds run up the federal debt.
“Both Kansas and Washington don’t really have a tax cut or tax policy problem. They have a spending problem that’s more like a spending addiction,” he writes. “…If the spending addiction in Washington isn’t addressed soon, even the smartest tax cut plan won’t grow the economy enough to fix it.”
From his pen, the the ears of President Trump and the U.S. Congress.