Kansas economy shrinks after heavy cuts to taxes and discretionary

>“In efforts to make Kansas the best state in America to raise a family and grow a business, Gov. Brownback cut income taxes for all working Kansans and completely lifted the income tax burden from small businesses. It worked,” said communications director Melika Willoughby. “Kansas set a record for new businesses formed every year since the tax cuts, and the state’s unemployment rate is under 4 percent — the lowest it’s been in over 16 years.”

>Kansas is hardly the only state facing a budget impasse. Deep-blue Illinois is struggling with its own tax-and-spending problems, in part a legacy of generous pension promises to state workers that the state cannot meet.

>But Mr. Brownback’s critics say overall growth and job creation lagged behind the national average and even behind other Midwestern states despite the tax cuts in 2012 and 2013.

>At the same time, the state was facing an estimated $900 million budget deficit over the next two years despite a series of spending cuts. The state Supreme Court ordered the state government to increase funding for lagging public schools by $293 million over the next two years.

>It’s hard to celebrate because Kansas is in such shambles,” state Rep. Melissa Rooker, a Republican from Kansas City suburb of Fairway, told The Wichita Eagle after the June vote to override Mr. Brownback’s veto of tax hikes. “The magnitude of the problems that we have to correct is so great.”

>Adam Michel, a tax policy analyst at the conservative Heritage Foundation, said Kansas’ problem wasn’t the tax cut but how the state handled it. He said eliminating taxes for some corporations created an incentive for businesses to “recharacterize” income, which created an unsustainable financial picture.

>“Their reform wasn’t designed properly,” Mr. Michel said.

>Other commentators haven’t been so kind. William G. Gale, an economist and senior fellow at the left-leaning Brookings Institution, noted that Mr. Brownback in 2012 promised that the tax cuts would represent “a shot of adrenaline in the heart of the Kansas economy.”

>Mr. Gale wrote in a blog post last month: “While the tax cut turned into a debacle, there is a potential silver lining: three clear messages for policymakers on federal tax reform. First, tax cuts won’t boost growth. Second, special tax rates for businesses will surely generate tax sheltering and revenue losses, but will not produce much new business activity. And third, most important, when Americans see what their tax dollars buy, they choose higher revenues and more government spending over lower taxes and draconian program cuts.”

>Tax cuts and business decisions

>Done right, however, tax cuts can draw businesses to states, Mr. Michel argued.

>“We see in large, aggregate data that tax cuts would affect a company’s decision,” Mr. Michel said. “If you’re going to build a factory in a low-tax state versus a high-tax state, you’re going to pick the lower-tax state. It’s not always the case that the company leaves a high-tax state, but their next factory or venture, the lower tax rate will be a factor.”

>General Electric Co., the technology conglomerate, faced such a choice.

>GE officials warned Connecticut Gov. Dan Malloy in 2014 that the state’s business tax was already high and the company would consider moving if it was raised.

>Mr. Malloy, a Democrat, promised he wouldn’t raise the tax. After winning his re-election bid in 2014, he announced $750 million in new business taxes. Massachusetts lawmakers swept in to offer GE $25 million in property tax breaks and $120 million in grants toward public works.

>GE broke ground on its new headquarters in Boston this year. Boston offered more than tax relief, though.

>GE Chairman and CEO Jeff Immelt cited the region’s concentration of high-quality universities, Massachusetts’ commitment to research and development, and the state’s tech-savvy workforce.

>“Boston was selected after a careful evaluation of the business ecosystem, talent, long-term costs, quality of life for employees, connections with the world and proximity to other important company assets,” Mr. Immelt said in the press release announcing the move.

>In a study of the move last year, Manhattan Institute fellow Aaron Renn said Boston has the right combination of workforce availability, accessibility and growth potential that draws companies to the area. With the right incentives, including tax breaks, companies can be enticed to move to such states.

>It’s all about finding a mix that fits a company, analysts said. Arizona and Florida have some of the lowest corporate tax rates in the nation, but they also have some of the lowest high school graduation rates in the country.

>Wisconsin might have higher graduation rates, but its population migration continues to be net negative — meaning more people are moving out of than into the state.

>Chris Edwards, an analyst at the libertarian Cato Institute warns that states can make only marginal changes because the federal government represents such large parts of their economies.

>“State governments follow the national government,” he said. “The federal government is so much bigger and overwhelms what states can do.”

>Amid global competition for businesses, there is only so much one state can do to affect outcomes, analysts said, and tax policy is just a small part of that.

>“The federal government dominates everything states do,” Mr. Edwards said. “The federal government is so much bigger and overwhelms what states can do.”

>Mr. Auxier said the federal government provides 30 percent of state spending through programs such as Medicaid and grants. Because states can’t deficit spend like the federal government, they need to make tough choices if the federal government pulls back or if they want to cut state taxes.

>As a result, economists say, the best state officials can do is diversify their economies and not depend on tax cuts to fix their problems.

>“Federal tax and budget policy, and Federal Reserve policy, have much to do with the economy’s growth rate,” Mr. Fisher said. “And the best predictor of state economic growth — a result that I have found, and many others — is the mix of economic activity in the state.”

Communist liar.

>>162581
>wanting schools to have enough funding to be open five days a week is now considered communism

>>162399
Who would have thought that the government paying people less would result in people spending less money!!

>>162585
Public schools are useless, teachers and teachers unions are corrupt to the core and easily 90%+ are to blame for the crisis, some wouldn't even bother to mark my work.

this >>162586
It is only a short term thing. Stay the course. Put long term gain over short term gain.

>>162647
An investment for long term gain would be funding for public roads, broadband and social services for working class areas. Tax cuts for the rich don't have a tendency to benefit anyone but the rich.

>>162399
The GDP went down a year, so? The GDP isn't a full picture of how an economy is fairing it s one indicator. California has the highest GDP in the US, but they also have the highest poverty rate. I also notice that you fail to mention it so I will...Look at all those red states with higher than normal GDPs, all of whom have lower tax rates.

>>162759
There are many kinds of long term investment and clearly public sector investment is overcapitalized compared to the market judging by the $100000000000+ annual waste.

>>162771
Cite your source, and put commas in your huge numbers.

>>162764

The point of the article is that taxes aren't the complete picture. Low tax rate for businesses can produce growth only to an extent by itself.
There's a balance to be had, wherein the state invests in human capital and infrastructure, which requires tax revenue, but at the same time attracts investment with favorable terms for businesses.

And there are plenty of red states with higher poverty rates than CA. While it's in the bottom 50% of states with respect to poverty rate it does have a more robust social safetynet than most any other state save for maybe MA.

>>162788
http://www.politifact.com/california/statements/2017/jan/20/chad-mayes/true-california-has-nations-highest-poverty-rate-w/
California has the same standard for social services as any other state. It is based on Federal poverty levels. California has the third highest payment rate, i.e. you get more money, but 34% of all people on welfare live in California but it only makes up 12% of the US population. If by 'robust' you mean there are more people on it, then you are correct. However most people wouldn't consider having to rely on food stamps and economically sound. Especially when the state is in debt and can't even afford basic fixes to it's infrastructure.

>>162647
The states with no teachers union or basically dead ones are the ones with shit educational stats as well.

>>162804
California has the strongest teacher's union in the US, so it must be at the top of the list...whoops
http://www.edweek.org/ew/qc/2017/2017-state-education-grades-map.html

>>162399
Did they forget to cut spending?

>>162399
Mostly because the government is so big and bloated. The government should not be included in any GDP figures, its a lazy way.

Also look at who has the highest GDP....Texas, one of the most conservative states in the union. Red states seems to be doing better.

>>162804
False.

>>162788
>And there are plenty of red states with higher poverty rates than CA.
Not really. When you accurately recognize that people relying on assistance are in poverty, CA is the poorest state.

>>162788
There are no other states with a higher poverty level than California, it's state infrastructure is crumbling (California just had a dam break because of lack of repairs and Jerry Brown begging for the Federal government to give the state a loan to fix it). The social services are based on the same income requirement as all other states. it takes on average 10 years to get Section 8 housing despite having the highest housing hubris costs in the US. The only thing robust is your and lack of understanding of the issues facing states like California.

>>163503
Forget? It did not even cross their mind once.

>>162788
Most of the people living in poverty in red states are blacks.

>>163578
>dam break
>a spillway becoming damaged is the same as a dam breaking open

Maybe gutting education wasn't such a good idea

>>163503

No, because even Republicans like some of the government resources that the state provides. It turns out that the big bad gubbamint is just a convenient scapegoat whenever people need to take their rage out on something ;)

so sick of democrat crooks and their propaganda.

>>163636
Didn't say the dam broke open, I said there was a dam break. The spill way is part of a dam and it broke, but nice attempt at straw man building. But of course you completely missed the underlining idea that the dam supported, that high taxed Democratic states don't have better infrastructure. Understanding context and the main idea of a statement are skills usually picked up by Junior High or so, you know, if you actually read for insight. Now, that little one is how you insult someone's lack of education and cognitive abilities.

>>163666
Shut up. I hate living in a red state and having to subsidize failures like New York or California with money the federal government steals from me. My ancestors fought against the union and the Great Usurper for independence in the 2nd American Revolution! By God, we'll fight again if we have too.

>>163730
Well, I don't mind living in CA and subsidizing your sister, your cousin, and your wife's legally mandated coverage for opioid dependency treatment because it barely costs me anything and besides it's just one person.

>>163735
>Well

whats so well you whore? those countries are traiotrs and must be punished. they betrayed and ran away on the first problem their shitholes faced since soviet saved them from genozide. ungrateful shitfucks. they had it all the best in soviet union. they had gold cutlerry and still were bitching about unratefull russians not cleaning their arces. now you are just fucking slaves whose shitholes are ruled from US embassies. i saw short ago on of your incest plague shit. he cant walk and cant speack any human language because your school system is not capable to teach children anymore. you are living of selling your females as teenage bimbos and whores across USA and Europe and your men are capable only to lick american dicks and work in low cost companies under indian and polish supervisors. you dont even have your own governments anymore.. all the same shit from USA or Canada. you pitiful piece of shit.

>>163666
I don't think the problem is party based, democrats increase taxes and STILL manage to get into a deficit.

>>163636
>jumps right for petty semantics when you get BTFO.

>>163558
>Mostly because the government is so big and bloated. The government should not be included in any GDP figures, its a lazy way.
>Also look at who has the highest GDP....Texas, one of the most conservative states in the union. Red states seems to be doing better.
Look who has the highest GDP/capita. California is higher than most states and the liberal northeastern states have the highest in the US.

And check out the most and least federally dependent states in the union:
https://files.taxfoundation.org/20170113143138/FedAidtoStates.png
Blue states are consistently net contributors, red states net takers.

California benefits from social programs because its tech industry has an engineering culture that values disruptive innovation. They encourage entrepreneurs to take creative risks on new business ideas. Higher income tax but a larger safetynet makes sense in this context.

>>163621
really? about 1/3 of the population of New Mexico is on medicaid. blacks are only 11% of the US and only about 3% of New Mexico's population. Red states in general have disproportionately low percentages of minorities yet disproportionately high number of benefactors of obamacare and medicaid.

Yeah, as a Kansan I know this all too well, school systems are hurting, public services are hurting, and infrastructure is crumbling. Brownback is a lobbyist and an idiot serving the koch brothers.

>>162399
Lowering taxes didn't fail, what failed was their model predicting a huge increase in revenue, which didn't happen, leading to a huge deficit as spending continue at the same level with less revenue from taxes, according to the article.

>>164844
They cut taxes, and it failed to produce economic growth. In fact, the opposite happened. As a general rule, tax cuts don't necessarily produce economic growth any more than tax increases.
States with among the highest business tax rates also have among the highest gdp/capita. there's little correlation between tax rate and growth between states. Because when taxes produce revenue, and states with more revenue also invest more into education, infrastructure, and social services, all of which contribute to a society where people want to live and businesses want to locate themselves.

A general rule of thumb with respect to taxes cannot be valid within the context of a complex society. It's a matter of finding an optimal balance of policies to maximize economic growth on a case by case basis.

This is where many republicans often fail; most liberitarians argue for an extreme case, no taxes, no government no matter the circumstance. Whereas most liberals don't argue for the opposite (communism) they just argue for nuance which is just about always going to be the best answer.

>>163730
Kek.

>>163885
Obama decreased the deficit.

>>164832
We have a winner.

>>164875
But massively increased the debt. You do know the difference between deficit and debt right? Deficit is per budget and debt is overall.

>>164832
They also have the highest taxes both federally and locally. The people paying taxes in those blues states are Republicans.

>>163636
The Department of Education is unconstitutional.