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Fast Money & Foreign Objects
The state's budget problems didn't go away after Governor Sam Brownback's reelection—they got worse. Will the lesson of tax-cuts-gone-awry give Republican candidates pause in 2016?
RUSSELL BERMANAPR 9 2015, 7:00 AM ET
Governor Sam Brownback of Kansas (Orlin Wagner/AP)
Surviving a tough reelection race, as Sam Brownback did in Kansas last year, can often be a cleansing experience for a governor. It should certainly bring relief. After all, Brownback managed to earn a fresh nod of support from voters despite a messy first term marked by a fiscal embarrassment of his own making.
Yet three months later, the humbling in the heartland goes on, much to the frustration of a Republican governor and one-time presidential contender who hoped to make Kansas the national emblem of conservative governance. Brownback's hard-fought victory on election day won him another four years, but it did nothing to fix the problem that nearly cost him his job: the state's finances. Kansas's budget has for months resembled a wallet with a hole in it—every time the state's bookkeepers peek inside, they find less money than thegovernment thought would be there. Just a few days after the November election, the Kansas budget office revealed that revenue projections were off by more than $200 million, bringing the budget gap facing Brownback to $600 million in all.
The yawning deficit is widely blamed on the deep income tax cuts that Brownback, along with a Republican legislature, enacted during his first two years in office. They not only slashed rates, but more importantly, they created a huge exemption for business owners who file their taxes as individuals. By Brownback's own description, the tax plan was a "real live experiment" in supply-side economics, with the idea being that lower taxes would spur investment, create jobs, and refill Kansas's coffers through faster growth. Yet even under the most charitable analysis, revenue has plummeted much faster than the economy has expanded.
to slow the income tax cuts over the next few years, raise taxes on cigarettes and alcohol, overhaul school funding, and divert money from the state's highway fund in order to balance the budget. It's not as if he's abandoning his conservative economic philosophy—he still wants to replace the state's income tax entirely with consumption taxes over time. And like any politician on the ropes, he is preaching patience. "These things take time," hesaid last month. He also acknowledged the toll his stumbles have taken on his image. "We're in Lent season, so I'm giving up worldly things, like popularity," he joked to a small crowd. Brownback has blamed the budget shortfall in part on automatic increases in education spending (a subject of a long-running court dispute), and he's cited a recent uptick in job growth as evidence that the tax cuts, on the whole, are working. "Kansas is on the rise, and the state of our state is strong," the governor proclaimed in an annual budget address in January.
Yet Brownback's latest proposals represent at least a partial retreat, and it's unclear how many of them the legislature will approve. "He’s trying to figure out how to save face. I think that’s the bottom line," Rochelle Chronister, a former Republican state chairwoman, told me. Chronister has led the GOP opposition to Brownback's agenda through the group she founded, Traditional Republicans for Common Sense. A separate anti-Brownback effort led more than 100 current and former Kansas GOP officials to endorse Brownback's Democratic opponent, Paul Davis, in the 2014 election. Brownback won anyway, 50 to 46 percent. "He’s lived and died by this philosophy," Chronister said of the governor, "and it’s becoming more and more obvious that it is not going to be successful."
Lori McMillan, a law professor at Topeka's Washburn University specializing in taxation, said Brownback's latest proposals were "band-aids" and an example of a "reactionary, by-the-seat-of-your-pants fiscal policy." The original tax plan went awry, tax analysts said, not merely because it slashed rates but because it wasn't paired with deeper structural changes to the budget. The exemption for businesses wasn't tailored narrowly enough to encourage job creation, and so people rushed to take advantage of it without actually boosting employment. "They used a lot of adjectives I’m sure they now regret, like 'immediate' and 'shot-in-the-arm' and 'adrenaline,'" said Joseph Henchman of the Tax Foundation. "Just cutting taxes, and so deeply, without really any plans for how the state will pay for the spending that it’s not cutting–that’s proven to be a big problem there."
* * *
The state's predicament has drawn its share of national attention, and not only because it offers up an impossible-to-resist headline (What is the matter with Kansas?). But given how neatly Brownback's tax experiment fits into the Democratic argument against conservative budgeting, it's surprising that it hasn't drawn more coverage. That's particularly unusual because, inside Kansas, some of the blame has gone to the Koch Brothers—the favorite bogeymen of Beltway Democrats. Koch Industries is based in Wichita, and the family was a big supporter of Brownback's original tax plan. "We’ve given tax exemptions to the Koch Brothers without necessarily any outcome," said McMillan, who criticized the loophole for business owners. "Have the Koch Brothers created any more jobs? Was it meant for multibillionaires? The idea is going to be no."
as Politico noted earlier this year, conservatives in states like Ohio, Missouri, and Indiana view Kansas as a cautionary tale and have pulled back on their own plans for deep, immediate tax cuts. "We are not going to do what Kansas did," South Carolina Governor Nikki Haley, a Republican, said bluntly in January as she discussed her plans to phase in tax cuts over a decade.
It will be more interesting to see what role, if any, Kansas plays in the 2016 campaign. Brownback may not be running, but the Republican presidential nominee will be asking voters to deliver the same kind of one-party power that he used to effect such significant change in 2011 and 2012. And it wasn't limited to economic policy—just in the last week, Kansas has approved legislationallowing people to carry concealed weapons without a permit, and Brownback signed what is arguably the nation's most restrictive abortion law.
The crowded field of GOP contenders for the White House means that a wide range of fiscal plans will be proposed, some pie-in-the-sky and others more realistic. The debate often devolves into hypothetical arguments about exactly how many jobs a particular proposal will create, or how much money it will cost. Kansas, as Brownback once conceded, offers "a real, live experiment." Are any of the candidates interested in learning its lessons?
http://www.theatlantic.com/politics...ass-failed-experiment/389874/?utm_source=SFFB
RUSSELL BERMANAPR 9 2015, 7:00 AM ET
Governor Sam Brownback of Kansas (Orlin Wagner/AP)
Surviving a tough reelection race, as Sam Brownback did in Kansas last year, can often be a cleansing experience for a governor. It should certainly bring relief. After all, Brownback managed to earn a fresh nod of support from voters despite a messy first term marked by a fiscal embarrassment of his own making.
Yet three months later, the humbling in the heartland goes on, much to the frustration of a Republican governor and one-time presidential contender who hoped to make Kansas the national emblem of conservative governance. Brownback's hard-fought victory on election day won him another four years, but it did nothing to fix the problem that nearly cost him his job: the state's finances. Kansas's budget has for months resembled a wallet with a hole in it—every time the state's bookkeepers peek inside, they find less money than thegovernment thought would be there. Just a few days after the November election, the Kansas budget office revealed that revenue projections were off by more than $200 million, bringing the budget gap facing Brownback to $600 million in all.
The yawning deficit is widely blamed on the deep income tax cuts that Brownback, along with a Republican legislature, enacted during his first two years in office. They not only slashed rates, but more importantly, they created a huge exemption for business owners who file their taxes as individuals. By Brownback's own description, the tax plan was a "real live experiment" in supply-side economics, with the idea being that lower taxes would spur investment, create jobs, and refill Kansas's coffers through faster growth. Yet even under the most charitable analysis, revenue has plummeted much faster than the economy has expanded.
to slow the income tax cuts over the next few years, raise taxes on cigarettes and alcohol, overhaul school funding, and divert money from the state's highway fund in order to balance the budget. It's not as if he's abandoning his conservative economic philosophy—he still wants to replace the state's income tax entirely with consumption taxes over time. And like any politician on the ropes, he is preaching patience. "These things take time," hesaid last month. He also acknowledged the toll his stumbles have taken on his image. "We're in Lent season, so I'm giving up worldly things, like popularity," he joked to a small crowd. Brownback has blamed the budget shortfall in part on automatic increases in education spending (a subject of a long-running court dispute), and he's cited a recent uptick in job growth as evidence that the tax cuts, on the whole, are working. "Kansas is on the rise, and the state of our state is strong," the governor proclaimed in an annual budget address in January.
Yet Brownback's latest proposals represent at least a partial retreat, and it's unclear how many of them the legislature will approve. "He’s trying to figure out how to save face. I think that’s the bottom line," Rochelle Chronister, a former Republican state chairwoman, told me. Chronister has led the GOP opposition to Brownback's agenda through the group she founded, Traditional Republicans for Common Sense. A separate anti-Brownback effort led more than 100 current and former Kansas GOP officials to endorse Brownback's Democratic opponent, Paul Davis, in the 2014 election. Brownback won anyway, 50 to 46 percent. "He’s lived and died by this philosophy," Chronister said of the governor, "and it’s becoming more and more obvious that it is not going to be successful."
Lori McMillan, a law professor at Topeka's Washburn University specializing in taxation, said Brownback's latest proposals were "band-aids" and an example of a "reactionary, by-the-seat-of-your-pants fiscal policy." The original tax plan went awry, tax analysts said, not merely because it slashed rates but because it wasn't paired with deeper structural changes to the budget. The exemption for businesses wasn't tailored narrowly enough to encourage job creation, and so people rushed to take advantage of it without actually boosting employment. "They used a lot of adjectives I’m sure they now regret, like 'immediate' and 'shot-in-the-arm' and 'adrenaline,'" said Joseph Henchman of the Tax Foundation. "Just cutting taxes, and so deeply, without really any plans for how the state will pay for the spending that it’s not cutting–that’s proven to be a big problem there."
* * *
The state's predicament has drawn its share of national attention, and not only because it offers up an impossible-to-resist headline (What is the matter with Kansas?). But given how neatly Brownback's tax experiment fits into the Democratic argument against conservative budgeting, it's surprising that it hasn't drawn more coverage. That's particularly unusual because, inside Kansas, some of the blame has gone to the Koch Brothers—the favorite bogeymen of Beltway Democrats. Koch Industries is based in Wichita, and the family was a big supporter of Brownback's original tax plan. "We’ve given tax exemptions to the Koch Brothers without necessarily any outcome," said McMillan, who criticized the loophole for business owners. "Have the Koch Brothers created any more jobs? Was it meant for multibillionaires? The idea is going to be no."
as Politico noted earlier this year, conservatives in states like Ohio, Missouri, and Indiana view Kansas as a cautionary tale and have pulled back on their own plans for deep, immediate tax cuts. "We are not going to do what Kansas did," South Carolina Governor Nikki Haley, a Republican, said bluntly in January as she discussed her plans to phase in tax cuts over a decade.
It will be more interesting to see what role, if any, Kansas plays in the 2016 campaign. Brownback may not be running, but the Republican presidential nominee will be asking voters to deliver the same kind of one-party power that he used to effect such significant change in 2011 and 2012. And it wasn't limited to economic policy—just in the last week, Kansas has approved legislationallowing people to carry concealed weapons without a permit, and Brownback signed what is arguably the nation's most restrictive abortion law.
The crowded field of GOP contenders for the White House means that a wide range of fiscal plans will be proposed, some pie-in-the-sky and others more realistic. The debate often devolves into hypothetical arguments about exactly how many jobs a particular proposal will create, or how much money it will cost. Kansas, as Brownback once conceded, offers "a real, live experiment." Are any of the candidates interested in learning its lessons?
http://www.theatlantic.com/politics...ass-failed-experiment/389874/?utm_source=SFFB
