Do voters still like tax cuts? The curious case of the Kansas governor's race.
| Washington
Sometimes tax cuts don’t drive an economy forward.
That’s the challenge that Kansas seems to be facing, and it’s a key reason a Republican governor faces an arduous reelection battle in a heavily Republican state.
Sam Brownback was elected in 2010, slashed taxes on state residents, and now faces criticism for damaging the state’s fiscal health rather than rejuvenating its economy.
In one video ad, rival gubernatorial candidate Paul Davis (D) speaks to the camera from a car that’s being driven in reverse down a farm-country road – a symbol, Mr. Davis says, of the state’s directional course. He cites slow job growth, cuts in the education budget, and credit-rating downgrades as the fruits of Governor Brownback’s policies.
Polls show Brownback essentially tied with Davis, a statehouse legislative leader, heading into Tuesday’s vote.
Although tax cuts are hardly the only issue in the race, the outcome will be viewed partly as a referendum on Brownback’s brand of “supply-side” economics, the longstanding penchant of conservatives to view lower taxes as a sure-fire catalyst for private-sector investment, consumer spending, and job growth.
Brownback says his policies are working. His website touts 55,000 private sector jobs created and $4 billion that tax cuts have left in the pockets of Kansas families and businesses.
The state does have low unemployment (4.8 percent of the work force as of September), as do other Plains states.
And Brownback says the credit downgrades, from firms like Standard & Poor’s, don’t mean the state’s finances are falling into ruin.
What’s clear, though, is that many Kansans, including some in his own party, don’t like the road he’s chosen. In one ad Davis boasts the support of 500 “Republican state leaders,” along with teachers and state troopers.
In August, Standard & Poor’s cited the weak outlook for state tax revenue in downgrading the state’s bond rating. The move “reflects our belief that there will be additional budget pressure as income tax cuts scheduled in future years go into effect,” the firm warned.
All this doesn’t mean that tax rates don’t matter for economic growth, or that there aren’t occasions when policymakers can simultaneously cut taxes and bring in needed revenue. Whichever side of the debate you’re on, it’s probably unfair to make too much of Kansas under Brownback as a case study.
But critics say it does offer a cautionary tale.
The left-leaning Center on Budget and Policy Priorities, in an analysis earlier this year, argued that Brownback’s tax cuts have mainly benefited the wealthiest households while eating a hole in a budget that the Kansans rely on for school funding and other needs.
“Since the tax cuts took effect at the beginning of 2013, Kansas has added jobs at a pace modestly slower than the country as a whole,” said the report, written by Michael Leachman and Chris Mai. “The earnings and incomes of Kansans have performed slightly worse than the U.S. as a whole as well.”
They said farmers reaped income gains as the state recovered from a drought.
William Gale, a Brookings Institution economist, recently argued that well-designed tax cuts “may raise economic growth, but there are many stumbling blocks along the way and no guarantee that all tax changes will improve economic performance.”
In the research, with a focus especially on federal rather than state policy, Mr. Gale and economist Andrew Samwick of Dartmouth College warn that economic gains can be hard to come by when tax cuts are paid for by borrowing.That’s not an option for Kansas, which like most states has balanced-budget requirements. But it has been an option for the federal government. And it’s an outside-of-Kansas bit of cautionary advice for Americans to consider.
