Shaw Friedman: Kansas, Gov. Brownback no 'Laffing' matter
Thursday, July 24, 2014 11:42 AM
LaPORTE – What’s the matter with Kansas? It’s a Laffer all right, but it’s no laughing matter.
That’s right. Arthur Laffer, former Reagan advisor and tax cut champion who was invited in to speak at Gov. Pence’s recent closed door “Tax Competitiveness and Simplification” Conference in July is still peddling (for a hefty speaking fee) the same discredited trickle-down, supply-side tax-cut nonsense that helped tank the economy under the Bush administration.
His latest disaster was urging Kansas’ Republican Gov. Sam Brownback to enact the largest tax cuts in percentage terms in one year that the state has ever enacted. Same old bromides coming from the same old, tired advisors who have wrongly advised those in government for years. It’s the same witch doctor stuff that the Indiana Chamber of Commerce tried to peddle this last session of the legislature when they sought to completely eliminate the business personal property tax and claim that once again magically such tax cuts would pay for themselves with increased business activity and new revenues.
Problem is this doctrine crashed and burned some two decades ago and there’s no evidence that the experiment works. Even Harvard’s Gregory Mankiw, a Republican and later chairman of George Bush’s Council on Economic Advisors, has written about the damage done by “charlatans and cranks” and he was specifically referring to a “small group” including none other than Arthur Laffer. He highlighted the role of those who advised Reagan that an across-the-board cut in income tax rates would magically raise tax revenue, and it simply never happened.
But the right-wing American Legislative Exchange Council (ALEC) and their allies in various state capitals like the Indiana Chamber of Commerce keep peddling this nonsense. Fortunately, in Indiana, a bi-partisan group of mayors and county commissioners, who have seen state support to cities, towns, schools and counties “trickle down” with each new tax, cut rose up together and said “no.” Without replacement revenue from the state which is currently hoarding a $2 billion surplus, Republican and Democratic mayors alike declared enough was enough. One after another wrote that even more important to inducing new business and creating jobs than tax cuts was a community where public safety was attended to, infrastructure was repaired, parks did not go to seed and public schools could turn out a skilled workforce.
Unfortunately, Kansas was not so lucky to see this kind of bi-partisan opposition to the Laffer tax-cut nonsense. Gov. Brownback after urging by Arthur Laffer pushed through his spectacularly ill-advised income tax cuts in 2012 and 2013. The cuts, which largely benefited the wealthy, cost the state 8 percent of the revenue it needed for schools and other government services. What happened as a result? Kansas’ economy isn’t booming. It’s a bust thanks to Arthur Laffer and supply side economics. Kansas just reported it took in $338 million less than expected in the 2014 fiscal year and would have to dip heavily into a reserve fund.
The state’s budget has plunged so deeply into deficit that Moody’s just downgraded its debt. With less money to spend, Kansas is forced to chop away at its only real hope for economic expansion, investment in public schools and colleges, cutting K-12 schools by 2 percent over the last two school years and higher education some 3 percent.
It’s a cautionary tale for our Hoosier legislators who listen to the siren song of Arthur Laffer, ALEC and their discredited supply-side, trickle-down theories. Most of ALEC’s efforts as Nobel laureate Paul Krugman have written are directed to trying to impose Kansas- like tax cuts in other states while calling for increases in state sales taxes, which falls most heavily on lower income households. Its agenda is simple and straightforward says Krugman: “ALEC’s efforts are directed not surprisingly at privatization, deregulation, and tax cuts for corporations and the wealthy.”
Maybe it’s time to take a lesson from disasters like that pushed on the state of Kansas by supply siders like Laffer and ALEC. Maybe, just maybe, the next time our governor holds a “tax competitiveness and simplification” conference, he might want to invite in speakers from all sides of the spectrum like the Center on Budget and Policy Priorities or even the non-partisan Multi-State Tax Commission who could give a much more balanced picture than the one presented.
We’ve got to do better than Arthur Laffer. And that is no laughing matter.
Shaw R. Friedman is a LaPorte attorney who has advised various local government entities during the 30 years of his law practice and is a regular HPI contributor.