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Republicans Can't Quit Brownback Mountain

June 29, 2014

For Republicans, it is the love that dare not speak its name. Tax cuts don't pay for themselves by generating economic growth so explosive that government revenues exceed the levels they would have otherwise reached. Ever since the Laffer Curve was first sketched on a napkin for the likes of Jack Kemp and Ronald Reagan, federal tax cuts have instead produced only record income inequality and mushrooming national debt. Nevertheless, GOP orthodoxy is unchanged, even as Governor Sam Brownback's tax cuts for the rich and small businesses truly are what's the matter with Kansas.

As Josh Barro aptly put it in the New York Times, "Yes, if you cut taxes, you get less tax revenue":

Kansas has a problem. In April and May, the state planned to collect $651 million from personal income tax. But instead, it received only $369 million.
In 2012, Kansas lawmakers passed a large and rather unusual income tax cut. It was expected to reduce state tax revenue by more than 10 percent, and Gov. Sam Brownback said it would create "tens of thousands of jobs."

As it turns out, Brownback and his GOP allies were wrong on both counts. For starters, as Christopher Ingraham explained in the Washington Post, "Tax cuts in Kansas have cost the state money -- and job creation's been terrible."

The only problem? That job growth hasn't exactly materialized. In fact, as Josh Barro notes in a must-read over at The Upshot today, job growth in Kansas has actually lagged behind the U.S. average, especially in the years following the first round of Brownback tax cuts in 2012.

But that's not the only problem. Thanks to Brownback's supply-side snake oil, the Jayhawk State is facing an unprecedented budgetary catastrophe. In 2012, the Governor and the GOP-controlled legislature slashed the top income tax rate from 6.5 percent to 4.9 percent while shifting the burden to the Kansas' lower income residents. Governor Brownback repeatedly declared his ultimate goal to is eliminate the state income tax altogether. But as Brownback's own Governor's Council of Economic Advisers warned in March, the Kansas economic miracle he predicted has not to come to pass. Instead of jobs, the "Red State Model" Brownback boasted of in the Wall Street Journal has brought only red ink:

April income fell about $93 million short of projections. Overall, the state has taken in about $480 million less than it had by this point in the last fiscal year.

By fiscal year 2019, Kansas will have to slash $900 million in spending (over 14 percent of all expenses) in order to achieve the balanced budgets required by state law. Already gripped by a funding crisis for education triggered by a recent state Supreme Court ruling, Kansas also saw its credit rating cut by the Moody's rating agency.
It's no wonder Governor Brownback is in real danger losing his reelection bid to his Democratic challenger Paul Davis in that blood red state.
It wasn't supposed to end this way for either the good people of Kansas or Sam Brownback. After all, last month Brownback again took to the pages of the Wall Street Journal to brag about his "Midwest renaissance rooted in the Reagan model." Just three months ago, Chris Moody described Brownback as "the possible GOP presidential contender no one's talking about." And in March, Stephen Moore and Arthur Laffer himself anointed Sam Brownback as the poster child for what they termed "the Red State Path to Prosperity."
In their joint op-ed, Laffer proclaimed that "Red states in the Southeast and Sunbelt are following the Reagan model by reducing tax rates and easing regulations." Which means, as Politico reported in a fawning October profile, "Arthur Laffer is back as GOP tax man":

Now, Laffer is back. The 73-year-old helped Gov. Sam Brownback (R-Kan.) sell his tax reform idea to Kansas, pushed Republican Tennessee Gov. Bill Haslam to ditch the estate tax and gave momentum to North Carolina lawmakers desperate to slash rates. All told, Laffer has advised about a dozen GOP-run states on taxes in the past couple of years.

As it turns out, Laffer's toxic brew is precisely what's the matter with Kansas. As the Center on Budget and Policy Priorities (CBPP) documented in March, Kansas has lagged the U.S. a whole in jobs and income growth since its tax cuts went into effect in December 2012. Kansas is one of the few states still slashing education spending. And the revenue shortfalls show no signs of easing.
It's no wonder U.S. News concluded, "Kansas Can't Tax Cut Its Way to Prosperity." Sam Brownback, Pat Garafolo explained, has been practicing the equivalent of flat-earth economics:

There was no real reason, though, to think that Brownback's tax plan would have dramatic effects on his state's economy. In fact, the history of tax cutting as a job-producing policy at the state level is full of measures that were sold as able to cause a boom, but turned out to be a bust. As the Economic Policy Institute and the Massachusetts Budget and Policy Center found in a comprehensive review, "The evidence from the hundreds of survey, econometric, and representative firm studies that have evaluated the effects of state and local tax cuts and incentives makes clear that these strategies are unlikely to substantially stimulate economic activity."

What's failed at the state level long ago proved catastrophic for the federal government. Ever since Ronald Reagan first took the oath of office, Republicans have taken it as an article of faith that we live on the top half of Arthur Laffer's curve above, a place where reducing tax rates magically increases tax revenue. Instead of building a more prosperous America, Republicans built only national debt and record income inequality.
Which is why in June 2012, not a single economist surveyed by the University of Chicago Booth School of Business agreed with the statement, "a cut in federal income tax rates in the US right now would lead to higher GDP within five years than without the tax cut." In his comments, David Autor of MIT pointed out, "Not aware of any evidence in recent history where tax cuts actually raise revenue. Sorry, Laffer." Former Obama administration economist and current University of Chicago professor Austan Goolsbee put it this way:

"Moon landing was real. Evolution exists. Tax cuts lose revenue. The research has shown this a thousand times. Enough already."

Enough indeed. Republicans may not be willing to quit Brownback Mountain, but Kansans--and all Americans--should. After all, the story never changes and always ends in tragedy.


About

Jon Perr
Jon Perr is a technology marketing consultant and product strategist who writes about American politics and public policy.

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