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Kansas Abandons Massive Tax Plan That Trump Was Using For His Own Modeling

Photo Credit: Gage Skidmore

Kansas has rejected a tax-cutting experiment that led Sam Brownback to international attention and formed the model for which the Trump administration was hoping to base its own plan off.

The tax plan not only met opposition from state Democrats but also from Brownback’s own Republican party members. The bill was meant to reverse many tax cuts that Brownback believed would stimulate the local economy. Under the plan, the state of Kansas would have experienced a $1 billion hole in its budget.

Brownback started to formulate his plan in 2012 with the goal of a “march to zero.” He believed strongly that the loss of money from tax cuts would flow back into the economy through other means.

Before the plan was even released it was met with opposition because Brownback was being advised by Arthur Laffer, the economist who inspired Ronald Reagan’s “trickle-down” economic theory. That partnership eventually labeled the state as “Brownbackistan”.

Senator Tom Holland, of Baldwin City, was one fo the first to welcome the end to “Sam’s march-to-zero madness”.

With the defeat of the plan, limited liability companies (LLCs) and so-called pass-through businesses in the state will no longer receive deep tax cuts. Under the plan, independent business owners and farmers would pay no state tax on the bulk, if not all, of their income.

Under President Trump’s own tax plan, a similar tax break would occur with likely the same ramifications.

Under Brownback’s leadership, the number of LLCs in Kansas jumped from 190,000 to 300,000 as tax rates plummeted. At the same time, jobs growth slowed in comparison to neighboring states.

Laffer, refusing to admit defeat, told The Guardian during an interview that Brownback’s plan didn’t go far enough. “When you put an atomic bomb on a place, it will materially change the place – but a cherry bomb probably won’t change the buildings or anything else,” Laffer lamented.

The state’s new tax plan is expected to raise $1.2 billion in new revenue over two years to close projected budget shortfalls totaling $889m through June 2019.

The plan will help raise much-needed funds for public schools. The state’s Supreme Court ruled in March that 286 local public school districts were receiving inadequate funding. On Monday night, lawmakers voted to increase the state’s $4 billion in public education spending by $293 million.

Brownback and the few allies he has remaining in Kansas continue to argue that the local economy will be destroyed by tax increases.

 

James Kosur
  

James Kosur is the Editor-In-Chief and co-founder of Hill Reporter. He recently served as an editor for Business Insider and various other publications. You can reach him at James@HillReporter.com.

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