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The Republicans’ tax reform plan is following in the footsteps of the controversial Kansas tax cut experiment that ultimately faltered, several federal and state lawmakers warned during a Nov. 2 press conference at the Capitol.
House Republicans released Nov. 2 their long-awaited tax reform bill, a plan that is likely to change, perhaps drastically, in the coming days.
An all-Democrat lineup—including Sen. Michael Bennet (D-Colo.), Rep. Cheri Bustos (D-Ill.), and Kansas House Minority Leader Jim Ward—tried to couch the GOP plan as analogous to a 2012 tax reform package in Kansas that eliminated the state’s top income tax bracket, cut rates for the two lower brackets, completely eliminated taxation of income from passthrough entities, and raised sales tax and vehicle registration fees. Under the plan, state revenue dropped about $1 billion per year. This year, the GOP-controlled House and Senate overrode Kansas Gov. Sam Brownback’s (R) veto of a bill that rolls back much of his 2012 tax cut package, including the controversial exemption for passthrough income.
The federal and state lawmakers blasted the House Republicans’ tax reform bill, calling it shades of the “failed Kansas tax experiment.” Among several provisions, the Republican tax reform bill would reduce the rate for passthrough business income to 25 percent, phase out the estate tax over six years, tweak and decrease the number of personal income tax brackets, and increase the child tax credit.
The Democrats were short on details and said they’d be in favor of several of the bill’s provisions. But they said the overall bill would hurt the country’s fiscal health like the reforms under Brownback.
“Republicans are serving up the same trickle-down nonsense that failed in Kansas,” Sen. Debbie Stabenow (D-Mich.) told reporters during the press conference. “The Republican tax giveaway plan says they care more about people who are part of the 1 percent of Americans more than everyone else.”
Ward said that the Kansas plan “crashed the state’s economy,” where the state finished 48 and 49 in job growth over two of the three years the cuts were in place. He said the state should provide an example so that U.S. politicians don’t follow suit.
“If you crash the U.S. economy, you’re going to crash the world economy,” he said. “Beware. The Kansas case study says beware.”
Congressional Democrats and supply-side economics critics also levied Kansas comparisons during a Nov. 1 Senate committee hearing when they said reducing taxes for the wealthy would inevitably lead to cuts to programs for the middle class.
Ward explained that the architects of the Kansas experiment, including Brownback and Arthur Laffer, recently an economic adviser to the Trump campaign, promised that tax cuts would lead to job growth and a booming economy. But the reality was very different, as the cuts produced crashing state revenue, a stagnant local economy, and cuts to essential state services, Ward told the Senate Democratic Policy and Communications Committee.
“The Kansas tax experiment was a complete and utter failure that bankrupted our state,” Ward said. “To implement this failure of policy at a national level is a mistake of immeasurable proportions.”
While the Kansas tax cuts package eliminated the state’s top tax bracket and cut the rates for the two lower brackets, it also eliminated taxation of income from passthrough entities, a change that allowed some of Kansas’ wealthiest taxpayers to “continue to utilize state services without paying any state income taxes whatsoever,” Ward said during the hearing.
“It was fundamentally unfair,” he said. “It was the biggest loophole in our state’s history, allowing 330,000 of the wealthiest Kansas to pay no income tax at all.”
And as state revenue dropped by around $1 billion per year as a direct result of the cuts, taxes went up for the middle class and the poor in the form of increased sales taxes, increased property taxes, and the elimination or reduction of popular tax deductions, such as those for medical expenses and home-mortgage interest, he said.
The effect of the tax cut package on the state’s ability to provide basic services was “devastating,” Ward said. “While we’re paying more in taxes, we’re getting less when it comes to our schools, our infrastructure and our public safety,” he added.
The K-12 schools provide a good example of the effect of tight budgets on public services, Ward said. “We have larger class sizes, and our programs that help kids that have challenges were being cut. The school day has been shortened, school weeks were being shortened.”
At the beginning of the current school year, there were 1,500 open positions for K-12 teachers in the state because “teachers are not choosing to stay in Kansas to have a career,” he said.
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