What’s The Matter With Kansas Now? Tax Cuts.

Terrance Heath

What’s the matter with Kansas? That was the question posed by Thomas Frank’s 2005 book and the eponymous documentary, which examined how the 19th century hotbed of left-wing populism became an outpost of the most extreme right-wing conservatism.

Nine years later, not much has changed.

What’s the matter with Kansas now is the one thing that was supposed to be right with it, according to conservatives. In 2012, Sam Brownback signed a massive tax cut law that was the centerpiece of his agenda. Americans for Tax Reform said it would make Kansas “the story of the next decade.” The Cato Institute called the tax cut “impressive” and gave Brownback a “A” in fiscal policy.

Kansas was supposed to be the GOP’s shining example of the transformational economic power of tax cuts. Two years later, Kansas is a “smoking ruin.”

Tax cuts cost Kansas about 8 percent of its revenue, worsened the recession’s damage to schools and other public services, mostly benefited the  wealthy, and failed to boost the states economy. Kansas’ rate of job growth is far below other states. Meanwhile Kansans are earning even less than they were before, and more businesses have collapsed than have started, since the tax cuts took effect.

What if Brownback had achieved his goal of eliminating state income taxes altogether. Despite the inevitable conservatives who will claim that Brownback failed because he didn’t eliminate income taxes, Brownback would be trailing his Democratic challenger by a lot more than 3 or 4 points, and there would be an even bigger smoking fiscal crater where Kansas used to be.

What’s the lesson of Kansas? It’s not so much a lesson as a remedial course in reality. What’s the matter with Kansas is that conservatives again went out of their way, and caused a great deal of suffering, to prove what we already knew about taxes.

We already knew that:

  1. Tax cuts for the wealthy don’t stimulate the economy. Tax cuts can’t jump-start a flagging economy, because they’re a “supply-side remedy for a problem caused by lack of demand.”
  2. The wealthy don’t spend their tax cuts. Tax cuts don’t create demand because the wealthy will save the money instead of spend it. The saving rate among the rich went up after Bush’s tax cuts in 2001 and 2003. The rate fell under Clinton, when taxes went up.
  3. Tax cuts for the wealthy don’t create jobs. Instead of producing job growth and prosperity, the Bush era tax cuts resulted in an era of zero net job creation.
  4. Tax cuts for the wealthy don’t result in higher revenue. In fact, economists say tax cuts do not spur enough growth to pay for themselves.
  5. Tax cuts for the wealthy reduce revenue. The Bush tax cuts reduced revenue significantly.
  6. Tax cuts for the wealthy mostly benefit the wealthy. Their taxes fell and their incomes increased dramatically after the Bush tax cuts, while the gap between rich and poor widened.
  7. The middle class end up paying more taxes. U.S. taxpayers with the very highest incomes pay income taxes worth only 18 percent of their income on average, compared to 25 percent for the typical American.
  8. Tax cuts for the wealthy don’t spread prosperity. Between 1992 and 2007, a time in which income for the average household grew 13% and that of the top 1 percent grew 123%, the income for the top 400 households grew fully 399%.
  9. Taxes are really low for the wealthiest. The average federal income tax rate for the 400 richest Americans was 17 percent in 2007, down from 26 percent in 1992.
  10. The cost of tax cuts for the wealthy exceeds the value of budget cuts. The estimated cost to the government of the tax deal extending the Bush tax cuts for the wealthy, $42 billion this fiscal year, exceeds the stated $38 billion value of the savings from the federal budget cuts lawmakers approved last week.
  11. Some patriotic millionaires want to be taxed. One group of millionaires is saying that they are more than willing to pay more for the good of their country. The “Patriotic Millionaires” penned a letter to President Obama, Senate Majority Leader Harry Reid and House Speaker John Boehner urging them to “increase taxes on incomes over $1,000,000.”
  12. Most Americans support higher taxes for the wealthy. A full 72% of adults approve of increasing federal taxes on households making more than $250,000 starting in 2013, according to the latest New York Times/CBS News poll.

In politics, as in life, lessons are repeated until they are learned.

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