This fiscal year, the state of Kansas is facing a $280 million budget shortfall as a result of one of the largest tax cuts in the states history in 2012. One of the biggest targets were small business and partnership profits, which were made tax exempt. Next fiscal year’s shortfall is projected to reach $648 million. In addition to financial shambles, the state has also experienced weak economic growth and bond rating downgrades. Complicating matters is a district court ruling that found that the state had been underfunding k-12 education. If not overturned on appeal, the state will have to increase education funding by at least $500 million per year. In a televised interview concerning his economic plan (devised by Art Laffer of the Laffer Curve), Kansas governor Sam Brownback said, “We’ll see how it works. We’ll have a real-live experiment.”
http://www.msnbc.com/rachel-maddow-show/brownbacks-economic-failures-start-look-even-worse
http://www.msnbc.com/rachel-maddow-show/faced-crisis-brownback-reconsiders-obamacare
4 Comments
In universities researches have to a Human Subject Review Board for any experiment that involves real people, because of a strong belief in “do no harm.” Apparently politicians are willing to play games with their constituents’ livelihoods. It’s great for economic analysis, we need that sort of variation to test theories, but it’s generally really bad from any sort of ethical perspective, since in this case the experiment isn’t working.
Note the same relative performance in Wisconsin: supposedly pro-business policies don’t in fact seem to lure businesses, since execs have children, and some execs care about employees and prefer to stay in pro-education states, they aren’t going to move to Kansas just to save a few bucks.
The small business tax cuts despite underfunding for education illustrates an interesting economic policy debate. As the professor points out, I’m not sure the small business tax cuts will have too large an effect.
What seems to be a mismatch between pro business policies and education in the state is interesting. I guess that the governor might believe that there is no choice other than to implement these pro small business policies and hope that businesses attract more workers and work to stimulate the economy which may in turn help them raise funding to combat their downfalls in education funding.
As Professor stated in his comment above, I do not think tax cut alone can sufficiently explain the budget deficit in Kansas state. I did my last week’s blog post on the case Wisconsin if you are interested in. In that post, I find that increasing tax rates for big corporations did not necessarily made the state suddenly unattractive to business owners.
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