Hey Missouri, You're the Show Me State, But Don't Follow Kansas's Lead


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You’d have to be living under a rock at this point (or mysteriously uninterested in tax policy - but then why would you be reading this) to not know about the fiscal crisis in Kansas. This recent USA Today article (which quotes smart folks at Missouri Budget Project and the Kansas Center for Economic Growth) does a really splendid job of relaying the absolute latest happenings in Missouri and Kansas (sneak peek - Missouri may be a little better off because their tax cuts are dependent on revenue growth, and Kansas has just gotten a fiscal vote of no confidence from another bond rating agency).

Here’s the drama in a nutshell: Governor Sam Brownback declared that his 2012 plan to gradually repeal the state’s income tax would be “a real live experiment” in supply-side economics. He pushed through two consecutive years of income tax cuts that disproportionately benefited the richest Kansans (while actually hiking taxes on the state's poorest residents), assuring the public these cuts would pay for themselves. (ITEP has done a ton of work analyzing the various tax cut proposals; peruse them here, here, and here.) Yet, Kansas ended this fiscal year $338 million short of total projected revenue, forcing the state to drain reserve funds to pay the bills.

The news continues to be grim.  And now, the inability of Brownback and the legislature to make these tax cuts add up has created a new problem: bond rating agencies think Kansas’ poor recent fiscal management makes the state less credit-worthy. Standard and Poor’s downgraded the state’s credit rating this week, meaning that every time the state chooses to borrow money to fund long-term capital investments such as roads and bridges, it will cost the state more to do so.

So, perhaps not surprisingly, Governor Brownback is in a close fight for reelection and even a number of notable fellow Republicans aren’t supporting him. Kansas seems to be sputtering and on a downward spiral, but in a move that leaves many tax analysts scratching our heads it appears that Missouri wants a little of what Kansas is laying down.  

In fact, lawmakers in Jefferson City enacted mammoth income tax cuts this spring that overwhelmingly benefit high-income taxpayers. The income tax cuts that were contentiously passed this year included a drop in the top income tax rate and a new deduction for business income. ITEP found that under this legislation the poorest 20 percent of Missourians will see a tax cut averaging just $6, while the top one percent of families will enjoy an average tax cut of $7,792 once the cuts are fully phased in.

This story isn’t going away anytime soon and it’s good to see journalists like those from respected newspapers covering this story in such depth.

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