Russell Berman describes yet another example of the old sleight of hand practiced by supply-side politicians, this time in the state of Kansas, where the governor Sam Brownback came into office promising that tax cuts would boost the economy of that state so much that it would more than compensate for the loss of revenue.
The yawning deficit is widely blamed on the deep income tax cuts that Brownback, along with a Republican legislature, enacted during his first two years in office. They not only slashed rates, but more importantly, they created a huge exemption for business owners who file their taxes as individuals. By Brownback’s own description, the tax plan was a “real live experiment” in supply-side economics, with the idea being that lower taxes would spur investment, create jobs, and refill Kansas’s coffers through faster growth. Yet even under the most charitable analysis, revenue has plummeted much faster than the economy has expanded.
Now, Kansas’s red ink has left the governor red- faced. Brownback is asking Republican state lawmakers to slow the income tax cuts over the next few years, raise taxes on cigarettes and alcohol, overhaul school funding, and divert money from the state’s highway fund in order to balance the budget. It’s not as if he’s abandoning his conservative economic philosophy—he still wants to replace the state’s income tax entirely with consumption taxes over time.
We are seeing this process repeated here in Ohio. First they cut income taxes on the rich promising that it will spur so much growth that it will generate more revenues than were lost in income taxes. Then when that fails to materialize, they raise taxes, but not on income. Instead they raise sales and other consumption taxes that disproportionately fall on lower income groups since they have to spend almost all their income to live while the wealthy spend only a small fraction of their income on the things on which taxes have been raised.
By now, everyone should realize this and stop believing in the magic income tax cut fairy that will bring prosperity to everyone.