By MEG WINGERTER
Gov. Sam Brownback defended his signature tax cuts last week after lawmakers overrode his veto of a bill repealing them, but he may have exaggerated their impact.
Brownback attributed lawmakers’ decision to roll back his 2012 tax cuts to the pressure of a very long legislative session.
Legislators faced a projected $900 million budget hole over the next two fiscal years, and the governor’s proposed solution to sell off the state’s share of a tobacco lawsuit, increase other types of taxes and cut spending failed to gain traction.
The new tax law will repeal an exemption for some businesses, add a bracket for Kansans with higher incomes and raise rates overall, though not to their pre-2012 levels.
“This is not to our long-term benefit. This is not the right way to go,” he said Wednesday during a bill-signing event. “There was another way.”
Brownback painted a dark picture of Kansas’ economy before the tax cuts and of its future after they are repealed — and a rosy image of their impact on the state.
Here’s a look at some of the governor’s statements and how they compare with available information.
On Kansas’ economy before the tax cuts: “We’ve been declining as a percent of the population in the country. We haven’t had robust economic activity.”
Partially true. From 2000 to 2010, the number of people leaving Kansas was greater than the number moving here.
Whether Kansas had “robust” economic activity is subjective, but growth in the state gross domestic product was better than the national average from 2006 to 2011, before the tax cuts.
In 2012, Kansas dropped to 35th for growth of gross domestic product, and it hasn’t beaten the national average during any of the years the tax cuts were in place. In 2016, the state’s economy grew only 0.3 percent, placing Kansas 42nd in the nation. The lackluster growth may be partially due to weakness in the agriculture, industry and aviation sectors, however.
On how the tax cuts have affected the population of Kansas: “We were seeing that attraction (of residents) and particularly attracting in the region and particularly on the Missouri border.”
False. While economic data doesn’t show whether the tax cuts induced businesses to cross the border from Missouri, the state has lost more residents than it gained in recent years. The last time Kansas gained more residents from other states or countries than it lost was 2011.
On business growth: “We’ve seen record small-business creation.”
True, at least for the last decade. From 2007 to 2011, the Kansas Secretary of State’s Office reported about 13,000 in-state new business filings each year. Since 2012, business filings have increased annually and topped 18,000 in 2016. Since 2012, new business formations and the total number of businesses in Kansas have increased faster than they did from 2007 to 2011.
A July 2016 study found that some self-employed Kansans registered as businesses to avoid the tax, however, so it isn’t clear how many of those filings represented new businesses.
On job growth: “We’ve seen record private sector employment.”
True. Private sector employment in Kansas hit a high of 1,159,000 in September 2016, though it has dropped since. Total employment, which includes public sector jobs, also peaked at 1,415,600 during the same month. Private sector employment increased 4.2 percent and total employment increased 3.2 percent from when the tax cuts took effect in January 2013 until January 2017.
During the same time, employment nationwide grew about 8 percent.
On unemployment: “We’ve seen record low, for the past 17 years, unemployment rates for the state of Kansas.”
True but incomplete. The Kansas unemployment rate hit a low of 3.8 percent in March. The last time it had been that low was in October 2000. For the last two years, the unemployment rate has bounced in the range between 4.0 percent and 4.3 percent, which is in line with pre-recession unemployment.
Labor force participation peaked in 2009, however, so the low unemployment rate may reflect more people retiring or leaving the work force for other reasons, such as having health problems or needing to care for family members.
The takeaway: Since the tax cuts took effect in January 2013, employment in Kansas has increased, though not as fast as the national average, but the state has faced revenue shortfalls. The number of businesses in Kansas has increased, but population and economic growth have stagnated.
Whether Brownback’s predictions of slowed growth will come to pass once taxes are increased remains to be seen.
Meg Wingerter is a reporter for the Kansas News Service, a collaboration of kcur.org, Kansas Public Radio and KMUW covering health, education and politics. You can reach her on Twitter @MegWingerter.