First off, I’d like offer personal thanks to the Kansas Legislature and Governor Brownback for joining together to enact the wholesale cuts that essentially eliminate taxation on independent businesses, regardless of size.
In my day job, I work for wages as a professor, and there my taxes have been reduced, but not eliminated. But over the years I have also invested in the Free State Brewery (yum), Wheatfield’s Bakery (yum, again), two rental properties, and a boutique resort hotel, as well as having a modest flow of royalties from various books and consulting projects. On this income, my wife and I will pay no taxes, or so it seems.
As someone who engages in various “job-creating” enterprises, I suppose I should be happy that I’ll keep a little more of my income. And perhaps the brewery and the bakery will hire a few more folks, with their new-found wealth.
To tell the truth, however, none of these enterprises have made hiring decisions based on tax policy, although the Free State’s expansion into bottling was certainly eased by very generous federal write-off policies.
Maybe the farmers who will pay less in taxes will hire more workers, or buy more machinery. Maybe. But it will be the biggest partnerships and S corporations that will reap the most benefits, and we’ll never know the extent of their truly substantial gains.
We will, however, discover the public costs to disbursing these private benefits. Within two years, the Legislative Research Department projects a $240 million deficit, which balloons to more than $800 million for each year after 2014.
The governor betrays no worries here, at least publicly, stating “We will have pro-growth tax reform in Kansas this year that will create tens of thousands of jobs and will make our state the best place in America to start and grow a small business.”
In what world? There is simply no evidence, nor any studies, to suggest that tax reductions alone can ever generate this kind of economic growth, much of it untaxed.
The alternative, of course, is to cut spending, with education, health, and highways taking the major hits. After all, that’s where the money is. School funding, already below constitutionally required levels, will likely fall even further, and this itself is a disincentive to new investment in the state by major employers.
The Brownback Administration says it will reduce Medicaid costs by almost $900 million over three years, based as much on hope as any solid analysis. Indeed, across the country, Medicaid costs have steadily risen, and such increases would move Kansas further into the red.
But hey, I’ve gotten my tax breaks – lower rates on my salary and nothing on my partnerships, rents, and royalties – so why should I be concerned? Well, for one thing, my property taxes are almost certainly going to rise, negating much, if not all, of the state tax reductions.
Page 2 of 2 - More importantly, however, the quality of our state’s public life – including education from pre-school to grad school, health care for our least fortunate citizens, and excellent roads – will be put at severe risk.
Eliminating great chunks of tax revenue will benefit a relative handful of wealthy Kansans and create a new class of individuals who pay nothing to support the whole of the state. I await the figures on the hypothetical tens of thousands of jobs to created, and even those could not offset the lost revenue from the sweeping cuts.
As class sizes rise, as waiting lists lengthen, as potholes go unrepaired, the tax cut fanatics will just shrug, echoing Mad Magazine’s dopey, carefree Alfred E. Newman: “What, me worry?”
Burdett Loomis has taught at the University of Kansas since 1979.