Governor Sam Brownback’s tax policies are being challenged by a state legislator who’s running to unseat him, Paul Davis. "Gov. Brownback's `real live experiment' is not working," Davis said, using Brownback’s own description of the extreme tax changes he signed into law. Davis was referring to rising unemployment rates and a new Kansas Department of Revenue report showing revenues are falling below projections. Kansas lawmakers have slashed taxes over the past two legislative sessions and, despite what supply-siders would have you believe, tax cuts really don’t pay for themselves.
The Institute for Illinois’s Fiscal Stability at the Civic Federation in Chicago issued a report describing the lack of movement on fiscal issues as a “lost opportunity” for the state (we agree). Laurence Msall, president of the Civic Federation said, “This year was a lost opportunity as legislators failed to prepare for the extreme financial challenges everyone knows are on the immediate horizon. We see some progress this year on the backlog of unpaid bills, but nothing to address the unresolved pension crisis or to plan for the revenue loss coming next year.” Next year, the state’s income tax rate is scheduled to be reduced and with that even larger shortfalls in the state’s budget are expected.
Following up a story from last week about Archer Daniels Midland Company (ADM) asking for $20 million in tax breaks from Illinois, Illinois Governor Pat Quinn is now saying that he won’t approve any ADM tax breaks until the state’s pension system has been reformed.
For evidence of why special “tax incentives” don’t work in boosting state economies, look no further than this Washington Post story on the tax breaks that the District of Columbia tried to give LivingSocial last year. Shortly after being offered $32.5 million to expand its DC presence, the tech company did exactly the opposite, cutting its DC payroll from nearly 1,000 employees to just over 600. Today, just 244 DC residents work for the company. Had LivingSocial seen a rising demand for its product, it would no doubt have expanded its payroll and happily collected a $32.5 windfall courtesy of DC taxpayers. But promises of a special tax break aren’t enough on their own to convince a smart business owner to expand.