May 16, 2015


Seeded With Tax Cuts, Kansas Harvests the Benefits (ANDREW B. WILSON, May 15, 2015, WSJ)

What the news coverage missed was that if Kansas hasn't exactly catapulted into the front ranks in economic growth and employment, then it has at least moved a long way from the stagnation of recent decades. Consider:

• In March 2013, unemployment in Kansas stood at 5.5%. It has since dropped to 4.2%, tied for 14th lowest in the country.

• From 1998-2012, Kansas ranked 38th in private-sector job growth, according Bureau of Labor Statistics data crunched by the Kansas Policy Institute. In 2013--the first year after the tax reform--the state climbed to 27th place, and in 2014 it moved to 21st, placing it in the top half of states.

• In the second half of 2014, hourly wages in Kansas grew 3.5%, according to BLS data, far faster than the national average of 1.9%.

Then there is the Kansas City metropolitan area, a living laboratory that straddles the border with Missouri. On Mr. Brownback's side of the divide, the top personal income-tax rate is now 4.9%, beginning at $15,000 for single filers; in Missouri the top 6% rate starts at $9,000.

"I just think Kansas City is a great study," the governor says. "This is an unusual place, where you've got a city virtually equally divided between two states." The results? Over the past two calendar years, private-sector jobs increased by 5.6% on the Kansas side and only 2.2% on the Missouri. In the same period hourly wages grew $1.22 on the Kansas side, compared with $0.61 on the Missouri side.

To Mr. Brownback, those kinds of statistics show the success of his tax cuts. He says a reporter recently asked whether he could "definitively say this wouldn't have happened" without the reforms. "We don't have the studies that say that," he replies, "but we're in terrain that we have not seen before--and it's good terrain."

Such results make intuitive sense. Patti Bossert, who owns two employment agencies in Topeka, estimates the tax cuts saved her firms $40,000 last year. Seeing a windfall on its way, she spent $375,000 to buy and remodel an old building for a new company headquarters. "Our business has been phenomenal," she says. "Wages are going up, and the big problem now is that there are many more available job openings than there are qualified people to fill them."

Critics contend that Mr. Brownback's tax cuts have blown a hole in the state budget--$344 million in the 2015 fiscal year and $600 million in the next. The governor is filling those gaps by moving money from highway projects and delaying some public pension contributions. He has also proposed raising cigarette and alcohol taxes and pausing some of the tax cuts still scheduled to take effect. But he insists that the state will maintain a balanced budget and at the same time "continue our march to zero income taxes."

Posted by at May 16, 2015 8:54 AM

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