"The Kansas Experiment"

By: Rodney Hunter

The Kansas Experiment

The Kansas experiment also known as the Kansas Senate Bill, a bill written and

signed into law in May 2012 by Sam Brownback, Governor of the state of Kansas. It

was one of the largest income tax cuts in the state's history. As dangerous as this

seems, people were rattled by this output and wanted to know if they could get a strong

conclusion with this experiment. The cuts were based on a public legislation and was

published by the conservative American Legislative Exchange Council, also known as

the (ALEC). It’s one of the largest income tax cuts in Kansas history, it was introduced

in January 2011. It became effective on July 1st of the same year, One of the

engagements was that the part of the bill was the elimination of taxes on the

pass-through income. This was income that businesses such as sole proprietorships,

partnerships, limited liability companies, pass on to their owners instead of paying

corporate income tax on it. These owners paid a 7% individual income tax on the

income on the HB Palet 2117 in Kansas. This new act also cut the state's individual

income tax rates.

Let's take a look at this, the top income tax rates were cut from 6.45% and 6.25% to

4%, allowing higher earning taxpayers to pay the same marginal rate as the middle

class; the bottom rate was reduced from 3.5% to 3%. Brownback planned to bring those

rates down even more in future years. This impacted not only the lower class but took a

toll on the middle class as well. Reducing taxes was one of Brownback's two major

stated goals as governor. He expressed this many of times during his service of time,

not only to reduce the taxes but make sure the economy is where it should be.

Brownback hoped that the success of the tax cuts would help launch another campaign

for the presidency, as far as his last campaign; it didn't go well. As the bill was signed,

predictions were made by supporters for an economic revival in Kansas, and by

opponents for an unparalleled budget crisis. Brownback said that the plan would bring a

"shot of adrenaline" to the Kansas economy, his crew predicted the creation of 23,000

jobs a year in Kansas caused by natural economic growth. After signing the bill,

Brownback stated that the cuts would pay for themselves through the increased

revenue resulting from the state's economic growth. Supporters explained that the

predictions from the conservative Kansas Policy Institute predicted that the bill would

lead to a $323 million increase in tax revenue. In the spring of 2014, monthly revenue

for state government crashed, and fell massively short of projections. The Washington

Post and Michael Hiltzik, a reporter for the L.A. Times warned that job creation and

economic growth in Kansas were lagging to its neighboring states. By early 2017,

Kansas had over 9 budget cuts over the last four years, missed state payments, to

make up the budget shortfall, lawmakers would have to cut into state reserves to set

aside for future spending, postponed construction projects and cut medicaid benefits.

Since approximately half of the state's budget went to school funding, education was

particularly not cared for much. As far as the outcome in 2017, The National Public

Radio reported that state lawmakers were seeking to close a $900 million budget gap

following the nine previous budget cuts. The budget gaps had left Kansas well below

the national average in a wide range of public services from education to housing to

police and fire protection.Perhaps in education, school districts had realized the cuts

and started shutting down the school year early, eliminating school programs, cutting

maintenance, closing out teaching positions, making class sizes larger, increasing fees

for kindergarten, and cutting janitorial personnel and librarians. School districts were

consolidated and some schools were closed. This experiment with tax policy was such

a failure that a Republican legislature not only voted to raise taxes, but did so over the

veto of the governor!

The experiment in Kansas had important obligations for federal tax reform, the first

being not to expect tax cuts to raise the economy. One of the reasons for the failure of

this experiment is that they didn’t account for the ways that the economic world would

look like today, the pathways to economic growth is strong, stable and broadly shared.

Under supply-side theory, Kansas’ reduction in income tax rates, especially at the top of

the income scale should have encouraged more people to work. But there is no

evidence that this would happen. The labor force participation rate for Kansas’s age

25-64 was 80 percent in 2012 and 80.3 percent in 2016, but the change was not

statistically significant. Kansas constrained spending after enabling the tax cuts. Some

supporters argue that the tax cuts failed because lawmakers didn’t follow through with

spending cuts. For example, American Legislative Exchange Council (ALEC) Vice

President Jonathan Williams said that “Spending reductions necessary to implement the

plan were eschewed in favor of other tax increases, making any honest judgement of

the original plan’s success or failure impossible.” But Kansas policymakers did, they

constrain state spending following the tax cuts. Between the fiscal years 2012 and

2016, general funding rose only 0.3 percent due to the Bureau of Labor Statistics. Also

by looking at the standings of what could have occurred, Kansas had cut spending more

deeply. It’s economic performance would have been even worse, fewer jobs would have

been created, as teachers, nursing home aides paid with Medicaid funds, and road

maintenance contractors would have had less money to spend in local stores for their

job needings.

Lastly, let's talk about what else was a factor and what may have caused the suffering.

Now the Kansas economy grew 0.2 percent in 2015, which showed a decline curve

from 1.2 percent in 2014. Kansas ended 2015 with two quarters of economic growth, so

they entered 2016 in a recession. By the end of 2016, Kansas ranked 45th in job growth

for the last 12 months. Colorado lead the region with the 10th highest rate of

private-sector job growth, while Missouri and Nebraska rank 31st and 39th. However,

Kansas was in recession in 2016 for the same reason Canada also briefly fell into

recession the same year: a collapse in oil prices. Kansas ranks 10th in crude oil

production, and the price of a barrel of crude fell from around $100 in 2014, to an

average of around half that in 2015 and 2016. With overall employment barely

increased and economic activity was lower than all the other states, Kansas saw an

increase in the number of individuals with business income.The reason perhaps was

that zero tax rate on pass-throughs.The tax cuts did produce one explosion, however.

The state’s budget deficit was expected to hit $280 million this year, despite major

spending reductions. Despite its record, and the fact that many experts regard the

Kansas tax cuts as a failure, the 2017 Republican tax cuts has some of the same

elements of Brownback's policy, and many Republicans still embrace the ideology

behind the Kansas tax cuts.

c/c

1.) Chris Suellentrop (August 6, 2015). "The Kansas Experiment" . The New York Times

Magazine .

2.) Gleckman, Howard (June 7, 2017). "The Great Kansas Tax Cut Experiment Crashes And

Burns" . Forbes. Retrieved November 20, 2018.

3.) "What Congressional Tax Cutters Can Learn From Kansas" . Tax Policy Center . November

29, 2017.