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madokie

(51,076 posts)
Sun Jul 27, 2014, 02:55 AM Jul 2014

Here's What Happened to One State After its Republican Governor Implemented an Extreme Tax Cutting

Here's What Happened to One State After its Republican Governor Implemented an Extreme Tax Cutting "Experiment"
This is what's going on in Kansas after a statewide tax cut.


When Louis Brandeis wrote in 1932 that a "single courageous state may, if its citizens choose, serve as a laboratory; and try novel social and economic experiments without risk to the rest of the country," he was suggesting that state innovations might advance reform on the federal level. The progressive Supreme Court justice surely wasn't imagining anything quite like Brownbackistan.

Under Gov. Sam Brownback, however, the old Brandeis metaphor is especially apt for Kansas, where a highly publicized "experiment" in extreme tax cutting has just blown up the entire laboratory. As Kansans peer through the still-smoking ruins, they evidently don't much like what they see.

What makes the Brownback blowup feel so familiar is that the same experiment was mounted more than three decades ago, on the federal level, under the rubric of Reaganomics -- by some of the same people. It crashed miserably then, too. But the Republican right has a special knack for dressing up old mischief as fresh policy. To put this one over, Brownback has enjoyed heavy support from the Koch brothers -- chief financial backers of the ultra-right tea party -- whose industrial empire is headquartered in Kansas.

The statewide tax cut that Brownback pushed through the legislature in 2012 certainly benefited the most wealthy Kansans -- people just like the Kochs -- while inflicting higher taxes on middle-income and working-class families through sales and property tax increases. Proceeding with the expert advice of Arthur Laffer, author of the "supply-side" theory underlying the Ronald Reagan tax cuts, the gung-ho governor promised that these regressive changes would promote rapid economic growth. He predicted that his plan would produce 23,000 new jobs and over $2 billion in new disposable income for Kansans. Their tax payments were supposed to offset the loss of nearly 8 percent of state revenues.


http://www.alternet.org/tea-party-and-right/heres-what-happened-one-state-after-its-republican-governor-implemented-extreme
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Here's What Happened to One State After its Republican Governor Implemented an Extreme Tax Cutting (Original Post) madokie Jul 2014 OP
They are doing littlemissmartypants Jul 2014 #1
Same here in Oklahoma too madokie Jul 2014 #2
There's always the state surplus. bearssoapbox Jul 2014 #3
And this is why Democrat Paul Davis will beat Brownback in November. kaiden Jul 2014 #4
Strangely, Brownback's Kansas may have shown Laffer to have been correct HereSince1628 Jul 2014 #5
Great Post! boguspotus Jul 2014 #7
K&R.. butterfly77 Jul 2014 #6

bearssoapbox

(1,408 posts)
3. There's always the state surplus.
Sun Jul 27, 2014, 07:03 AM
Jul 2014

Right?

Oh. Wait...



And who does the putz blame???

"Brownback, like New Jersey Governor Chris Christie, has blamed President Obama for his state's growing red ink. "This is an undeniable result of President Obama's failed economic policies of increasing taxes and overregulation," Brownback's revenue secretary Nick Jordan said. Brownback's administration argues that because of uncertainty over the "fiscal cliff" in late 2012, some earners paid capital gains tax early, which depleted 2013 receipts.

These numbers don't add up. The fiscal cliff was a national event, but revenues fell far more in Kansas than in other states, according to a study by the Nelson A. Rockefeller Institute of Government. Furthermore, Goossen says, "Capital gains are not that big a piece of Kansas income. They don't even come close to explaining a $700 million income tax collection drop between fiscal year 2013 and fiscal year 2014."

http://www.vox.com/2014/7/8/5868717/sam-brownback-kansas-tax-cut

What a Cheney.

HereSince1628

(36,063 posts)
5. Strangely, Brownback's Kansas may have shown Laffer to have been correct
Sun Jul 27, 2014, 08:17 AM
Jul 2014

Laffer didn't argue that lowering taxes -always- increased tax revenue.

That's the erroneous position of people who ASSUME that taxes are already so high that taxes hurt both the economy and government tax revenue.

Below is Laffer's Curve and briefly how it can be employed to explain the Kansas revenue crisis. It's always great to be able to use the opposition's own weapons against themselves.

Laffer argued that the level of taxing was an optimization function...the performance of tax revenue relative to tax rate was similar to a "u" shaped curve lying on its side:




Notice this about the Laffer curve...every location along the revenue axis to the left of the optimal point (associated with 'm') is associated with TWO tax rates, one higher and one lower.

Most importantly, the SLOPE associated with those points is in the OPPOSITE direction, and so the Laffer Curve suggests that increases in taxation from that position have OPPOSITE effects depending on whether you are increasing from the upper or the lower taxation rate.

At any non-optimal tax rate, an increase in taxes will bring increased revenue if that rate is below optimal, while it will cause decreased tax revenue if the starting point is already above optimum.

This is basic optimization thinking, and many things function according to "Goldilock's Principles" with an optimum somewhere in the middle.

To make the Laffer Curve perform for the benefit of government, the policy makers must absolutely accurately know which of the points represents their government's position.

Unfortunately, tax-hating politicians and the US' industrial strength tax cutting lobby are generally clueless about the actual position of the tax rate relative to optimal.

They simply go with their ideologically-based notion that the position of the tax rates are ALWAYS too high...so in their minds they -must- be situated on the upper curve.

When the tax rate -isn't- above optimal, when it's actually below optimal when a serious tax cut happens...government revenues fall. And because of the slope of the curve, the performance of the fall will be worse if the tax rate was well below optimal.

Brownback's tax shortfall is consistent with Kansas having had tax rates below optimal at the start of his cutting.

IMO, lower than optimal tax rates are very likely a common thing, because tax-payers generally dislike paying taxes, and pressure politicians to keep taxes low.

The Reaganite political view that taxes are always too high seems to more reflect that broad population-wide dislike for taxes, than reality. And the dislike is especially strong among the rich who pay more when a tax is progressive. Reagan much disliked progressive income tax rates and it was one of the things that turned him from being a labor-leader into a disciple of Thatcher.

Because the rich (Koch-like) have the resources to employ the think-tank white paper writers and the lobbyists, they can make tax-cutting legislation happen which is good for them (consistent with the article on Kansas) but terrible for governments.








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