Archive for July 21, 2014

A Tale Of Two States

Posted: July 21, 2014 by watsonthethird in Current Events, Economics
Tags: , , , ,

An interesting juxtaposition in recent articles describing the circumstances of red state Kansas and blue state California.

The article about Kansas is titled “Sam Brownback’s Kansas Catastrophe.” Yeah, it’s not good. A former supporter complains that Governor Brownback is using the state as “crash test dummies for his own fiscal experiments.”

The experiment that Winter referred to is a sweeping income tax cut plan that Brownback enacted in 2011, which eliminated income taxes for small businesses, cut the highest income tax rates by 25 percent, and made smaller cuts for people with lower rates. Brownback has also signed bills cutting state budgets, declared that life begins “at fertilization,” and created an “Office of the Repealer” to eliminate state laws, regulations and agencies. He’s also ended guaranteed teacher tenure, and narrowed eligibility for welfare and Medicaid.

The tax cuts have come at a particularly steep price. The Wall Street Journal reported that tax collections fell by $685 million in the first 11 months of the fiscal year, putting Kansas on track to blow through its $700 million reserve fund by the middle of next year.

Brownback has insisted that he’ll make up future shortfalls with economic growth, but with 40 percent of state revenue traditionally coming from those taxes and no specific plan to make up the shortfall, Moody’s Investor Service recently downgraded the state’s debt rating. In their decision, Moody’s cited both the tax cuts and a state Supreme Court decision that found that Brownback and the legislature had cut funding for schools unfairly and too deeply in 2011, and would have to find budget savings elsewhere.

Now Brownback faces a tight re-election race, whereas he should have been a shoe-in in conservative Kansas–until he wrecked the state’s economy. Meanwhile, one of conservatives’ favorite punching bags is California Governor Jerry Brown. In 2012, he backed voter proposals to raise various taxes in order to cope with California’s deficit. How are things going in California?

Dire predictions about jobs being destroyed spread across California in 2012 as voters debated whether to enact the sales and, for those near the top of the income ladder, stiff income tax increases in Proposition 30. Million-dollar-plus earners face a 3 percentage-point increase on each additional dollar.

“It hurts small business and kills jobs,” warned the Sacramento Taxpayers Association, the National Federation of Independent Business/California, and Joel Fox, president of the Small Business Action Committee.

So what happened after voters approved the tax increases, which took effect at the start of 2013?

Last year California added 410,418 jobs, an increase of 2.8 percent over 2012, significantly better than the 1.8 percent national increase in jobs.

California is home to 12 percent of Americans, but last year it accounted for 17.5 percent of new jobs, Bureau of Labor Statistics data shows.

Can we finally–FINALLY–put an end to the myth that reducing taxes magically puts the economy into overdrive and as a consequence, actually increases tax revenues? It’s just not true. The only reason conservatives cling to this theory, despite the complete lack of evidence that it works, is simply because they don’t want to pay taxes.

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