Want a preview of what Kochworld looks like? Look no further than their home state of Kansas.
In 2012, the Republican legislature along with Governor Brownback enacted unprecedented changes to their tax system. Those changes included a full exemption from state taxes for "pass-through" income from corporations like Koch Industries, which is structured as a pass-through entity where all corporate income is considered shareholders' personal income, cuts to personal income tax rates, and elimination or reduction of tax credits which primarily benefited the poor and middle class.
The Center for Budget and Policy Priorities has the result, and it's grim:
As other states consider large tax cuts, they should heed these key lessons from Kansas:
- Deep income tax cuts caused large revenue losses. Kansas’ tax cuts this year are costing the state about 8 percent of the revenue it uses to fund schools, health care, and other public services, a hit comparable to a mid-sized recession. State data show that the revenue loss will rise to 16 percent in five years if the tax cuts are not reversed.
- The large revenue losses extended and deepened the recession’s damage to schools and other state services. Most states are restoring funding for schools after years of significant cuts, but in Kansas the cuts continue. Governor Sam Brownback recently proposed another reduction in per-pupil general school aid for next year, which would leave funding 17 percent below pre-recession levels. Funding for other services — colleges and universities, libraries, and local health departments, among others — also is way down, and declining.
- The tax cuts delivered lopsided benefits to the wealthy. Kansas’ tax cuts didn’t benefit everyone. Most of the benefits went to high-income households. Kansas even raised taxes for low-income families to offset a portion of the revenue loss; otherwise the cuts to schools and other services would have been greater still.
- Kansas’ tax cuts haven’t boosted its economy. Since the tax cuts took effect at the beginning of 2013, Kansas has added jobs at a pace modestly slower than the country as a whole. The earnings and incomes of Kansans have performed slightly worse than the U.S. as a whole as well. (An exception is farmers, whose incomes improved as the state recovered from a drought.) And so far there’s no evidence that Kansas is enjoying exceptional business growth: the number of registered business grew more slowly last year than in 2012, and the state’s share of all U.S. business establishments fell over the first three quarters of last year, the latest data available.
- There’s little evidence to suggest that Kansas’ tax cuts will improve its economy in the future. No one knows for certain how Kansas’ economy will perform in the years ahead, but it isn’t likely to stand out from other states. The latest official state revenue forecast, from November 2013, projects Kansas personal income will grow more slowly than total national personal income in 2014 and 2015.
Evidence from other states and academic studies casts further doubt on claims that the tax cuts will cause the state’s economy to boom. States that cut taxes the most in the 1990s performed worse, on average, over the course of the next economic cycle than states that were more prudent. And the academic literature overwhelmingly finds that states with lower personal income taxes perform no better economically than their peers.
Kansas is a study of a state hurtling toward total failure.
Besides schools, a range of other state services lay a foundation for a strong economy. Colleges and universities, libraries, public health programs, courts, parks, and other services help produce an educated and healthy workforce and make neighborhoods safer and more livable — all important factors in attracting businesses and boosting long-term economic growth.The recession deeply damaged Kansas’ ability to fund many of these services. And now, the massive tax cuts have caused funding for many of them to continue to decline. Examples include:
- Higher education.Kansas has cut funding per student for higher education by another three percent since fiscal year 2012, after adjusting for inflation, leaving funding 23 percent below pre-recession levels. Tuition at Kansas public colleges and universities has increased by 8 percent since 2012 and is 20 percent higher than tuition in 2008.
- Local libraries. Governor Brownback’s budget for next year would leave state funding for local libraries 35 percent below the 2012 level and 65 percent below the 2008 level, after adjusting for inflation.
- Local health departments. Kansas cut aid to local health departments, which provide immunizations and physical examinations for children and are the first responders to disease outbreaks and other health emergencies, by another 3 percent between fiscal years 2012 and 2013, leaving that funding 14 percent below 2008 levels. (Comparable data for fiscal year 2014 are not available.)
- Supports for families living in poverty. The number of poor children and parents receiving income support from the Temporary Assistance for Needy Families (TANF) program has declined by 41 percent since 2012, much greater than the 12 percent decline in TANF recipients nationally over this period, in part because Kansas enacted a number of policy and process changes that make it harder for families to access and continue receiving the support. The number of children whose families receive child care subsidies, often necessary for low-income mothers to find and hold a job, has also declined — by 16 percent — since 2012, also in part because of the adoption of more stringent policies.
- Courts. The Governor’s proposed budget for the Judiciary is 3.4 percent below 2012 levels, and down 16 percent since before the recession. The Chief Justice of the Kansas Supreme Court said recently that the judicial system, which has been understaffed for years, is at risk for statewide shutdowns after July 1 of this year.
But hey, the Kochs had a few hundred million extra to toss around in the last election cycle, so it's all good.