Kansas Gov. Sam Brownback isn’t just any old extremist driving the religious right’s social agenda and the Tea Party’s economic ideas. He’s not just any antigovernment zealot in charge of a government.
He’s the one next door.
Yes, Brownback is Missouri’s new neighbor, the one who tore out the front lawn and replaced it with a moat and gun turrets, presumably to protect that reptile farm in the back yard and whatever it is he’s got in the basement. And as if that isn’t enough, the kids want to check out his place for a play date.
Since becoming governor in 2011, Brownback has been a man on many missions. He completely defunded the state’s arts commission, making Kansas the first state to do so. He signed one of the strictest packages of anti-abortion laws in the nation, and fought gays and lesbians at every turn.
But Brownback’s signature issue has been taxation. After leading a massive primary-season purge of Republican moderates in the legislature, including the president of the state Senate, Brownback was able to enact the most draconian tax cuts in Kansas history—or maybe any state’s history. All of this was aimed at helping business owners and other wealthy individuals.
This is magical to many Missouri Republican legislators and their benefactor, Rex Sinquefield, St. Louis’ answer to the Koch brothers. Last year, inspired by Brownback and sponsored by Sinquefield, Missouri legislators passed their own tax-cut program, despite the state’s near-the-bottom national status in both tax burden and the funding of education and other vital services.
The Republicans narrowly failed to override Gov. Jay Nixon’s veto, and their leadership has vowed to return to the issue with a vengeance in the 2014 legislative session. With the December 1 opening bell for prefiled bills now upon us, it’s game on.
This might be a good time to see how things are working out in Kansas.
Understand that the tax cuts are blowing a huge hole in the state budget: $3.7 billion in lost revenue through 2018, even after actions in the past session to pull back on the madness. And the regressiveness and unfairness of Brownback’s plan is truly awful (and thus most likely to be emulated at some point in Missouri). For example, Kansas eliminated all state taxation on pass-through income to some 200,000 businesses that operate as LLCs, S corporations, and the like. (I know a little something about this as an owner of three LLCs in Missouri.)
What it means in practice is that the owners of a business pay no income tax, but their employees still do. At a typical Kansas law firm, the partners pay no tax because they’re compensated as pass-through business owners, but their secretaries and clerks still pay the state on their incomes.
This was described by one visiting expert at a University of Kansas forum as an “exotic” set of laws, certain to keep accountants gainfully employed in tax-avoidance work. It is unprecedented in the nation.
No wonder that during an Urban Institute forum earlier this year, economic experts from opposing camps—the right-leaning Tax Foundation and left-leaning Center on Budget and Policy Priorities—offered up Kansas when asked to name the state with the worst tax policies in the nation. Both cited the basic inequity of the new structure.
It gets worse. Moody’s Investors Service downgraded Kansas Department of Commerce IMPACT bonds in June from Aa3 to A3. “The outlook for the IMPACT bonds is negative, in view of potential income tax elimination with no measures in place to protect bondholders,” it explained. “The current rating and outlook are based on a belief that such measures may be implemented within the next year.”
People on the front lines in Kansas haven’t had to wait for an outlook: No fewer than 86 of the state’s 105 counties have increased property taxes to compensate for the cost of picking up services the state can no longer afford to provide.
Coupled with a substantial rise in Kansas sales tax—with more undoubtedly on the way—it’s more than a little disingenuous for Brownback and his backers to prattle on about how they’ve allowed taxpayers to keep more of their own hard-earned money. That is, unless they’re speaking only to an upper-crust audience.
Then there’s the impact of the cuts themselves. School funding, as a percentage of Kansas personal income, will hit its all-time low next year, says John Heim, executive director of the Kansas Association of School Boards. That pairs nicely with the situation at the higher-education level, where the state’s Board of Regents had to enact tuition increases because of the cuts.
And that’s just the tip of the iceberg. Imagine the fate of social-service agencies and the like at the hands of someone proudly elected to dismantle government.
Who would possibly celebrate all of this as “visionary leadership”? Who would hold this up as the model that Missouri should embrace as opportunity for “long-term growth,” even though it hasn’t been around long enough to measure short-term growth realistically?
Why, that would be King Rex Sinquefield, taking time off from his day job as collector of political pawns to pen a glowing review in October on Forbes’ website. The headline: “How Kansas Governor Brownback Schooled Missouri On Tax Cuts, And Showed The Region How To Grow.”
Sinquefield’s basic point is that Brownback’s tax cuts spurred economic growth in Kansas, and he cites a drop in the state unemployment rate from 6.9 percent to 5.8 percent. Trouble is, the numbers are for the wrong years, and he omitted the detail that the rate actually rose after tax cuts went into effect.
Brownback took office in 2011, and the tax cuts went into effect January 1, 2013. But Kansas Department of Labor statistics show the 6.9 percent figure is from 2010 and the 5.8 percent figure is from August 2012. So Sinquefield is crediting Brownback both for progress made before taking office and before his tax plan went into effect. The rate had actually dropped to 5.4 percent by the end of 2012.
Here’s the real stunner: Kansas unemployment actually rose a full half percent—to 5.9 percent—by August of this year, after the tax cuts took effect. Meanwhile, the national rate dropped. It rather blows up Sinquefield’s narrative, don’t you think?
The source whom Sinquefield cited for much of the data in the Forbes article is former Kansas budget director Steve Anderson, who’d offered to resign in March (and did five months later) after a Wichita, Kan., newspaper uncovered a $2 billion “spreadsheet error” in a presentation used by Brownback to tout his budget-cutting prowess.
It turns out Brownback was overstating his predecessor’s spending by that $2 billion—and thus, how much he’d saved by the same amount—but the governor escaped further scrutiny about the “error” when Republican legislators refused to investigate the matter. Anderson apologized. Some source.
The most telling item in Sinquefield’s article is a passage citing statistics that indicate the Kansas portion of the Kansas City metro area has gained more than 9,500 jobs from May 2012 to May 2013. He attributes this growth to Brownback’s tax cuts.
Conveniently omitted here is the fact that there’s a corporate-welfare border war raging between Kansas and Missouri, which has absolutely nothing to do with tax rates and everything to do with “incentives” used to lure jobs across the border. Sinquefield, who ironically opposes such incentives, is well aware of this fact, even if his audience is not.
The Kansas City Business Journal has reported that Kansas has had a slight edge over Missouri in the net migration of 595 jobs as of last March thanks to its economic development programs. But respected Kansas City civic leaders, led by Bill Hall of the Hall Family Foundation, have been raging against both sides for perpetuating a zero-sum game. They estimate that Kansas is spending $323,000 for every job it has gained.
Even more telling, one of the public officials most vocal about the detrimental effects of Brownback’s tax cuts is Hannes Zacharias, county manager of Johnson County, by far Kansas’ largest county, with almost 550,000 residents in the Kansas City metro area. Zacharias recently complained at a University of Kansas forum that the tax cuts were crushing county-government budgets like his.
“We are at the end of the food chain, and things run downhill,” he said.
So if the tax cuts were causing jobs to flee across Missouri’s borders to Zacharias’ county, why would they cause him such dismay? He’s on the scene. Sinquefield is not.
The intentional distortion of statistics to fill the false narrative of jobs following tax cuts is part of a disgraceful national effort. It’s the same one pretending that no-income-tax states like Texas owe their growth to tax policy when the needle is actually moved by such factors as the prosperity of oil-and-gas industries; low real-estate costs; trade with Mexico; population growth spurred by climate, birthrates, immigration, and so on.
But let’s say that you reject all of that, and you think Missouri should be inspired by the prospect of tax cuts creating job growth. Here’s a question for your legislator: Why not let what Brownback calls his “real-life experiment” unfold for a few years and then decide if it’s such a great idea after the facts roll in? Missouri is the Show-Me State, after all.
If Missouri politicians wait, they’re pretty certain to learn a lesson most citizens already know: It’s well and good to get along with your neighbors. But steer clear of the crazy ones.
SLM co-owner Ray Hartmann is a panelist on KETC Channel 9’s Donnybrook, which airs Thursdays at 7 p.m.
Commentary by Ray Hartmann
