Gov. Jerry Brown, accompanied by his wife, Anne Gust Brown, walks outside the Old Governors Mansion on election night in Sacramento, Calif., on June 3, 2014.
Rich Pedroncelli/AP

California, Kansas, and lessons about taxes

Updated
Kansas, one of the reddest of the nation’s red states, elected Republicans policymakers to dominate state government, and in 2012, they got to work slashing taxes. The goal was simple: cutting taxes, GOP officials said, would send Kansas’ economy soaring.
 
The experiment failed miserably. Kansas’ job growth has lagged behind neighboring states; it’s facing a profound budget shortfall; the promised growth hasn’t materialized, and the state’s bond rating was downgraded in part due to tax breaks Kansas can’t afford.
 
About 1,200 miles to the West, California offers a very different kind of case study. David Cay Johnston published a fascinating item in the Sacramento Bee over the weekend:
Dire predictions about jobs being destroyed spread across California in 2012 as voters debated whether to enact the sales and, for those near the top of the income ladder, stiff income tax increases in Proposition 30. Million-dollar-plus earners face a 3 percentage-point increase on each additional dollar.
 
“It hurts small business and kills jobs,” warned the Sacramento Taxpayers Association, the National Federation of Independent Business/California, and Joel Fox, president of the Small Business Action Committee.
 
So what happened after voters approved the tax increases, which took effect at the start of 2013?
Well, let’s put it this way: Kansas is probably looking longingly at California’s numbers.
Last year California added 410,418 jobs, an increase of 2.8 percent over 2012, significantly better than the 1.8 percent national increase in jobs. California is home to 12 percent of Americans, but last year it accounted for 17.5 percent of new jobs, Bureau of Labor Statistics data shows.
The larger point, of course, is that the right’s orthodoxy, if influenced by reality, needs revisions. Conservatives believe, without reservations or exception, that tax cuts always fuel positive economic results, especially if geared toward the wealthy, so capital can trickle down. Similarly, they believe with equal enthusiasm that tax increases always stunt economic growth.
 
And yet, here are Kansas and California, moving in opposite directions after pursuing tax policies that suggest the right’s orthodoxy is simply wrong.
 
There are other examples. We talked last year, for example, about Minnesota and Wisconsin – two similarly sized states with comparable populations, one of which elected Democrats to statewide office in 2010, while the other elected Republicans. The former raised taxes, the latter cut taxes. Which state is better off now? Take a wild guess.
 
David Cay Johnston concluded, “So next time someone tries to tell you that raising income taxes will destroy jobs, tell them the evidence just does not support that claim.”
 

California, Kansas and Tax Policy

California, Kansas, and lessons about taxes

Updated