Kansas Gov. Sam Brownback's (R) economic "experiment" obviously hasn't gone well. The combination of debt downgrades, weak growth, and disastrous state finances have created an ongoing disaster in one of the nation's reddest states.
Complicating matters, conditions aren't improving. The state AP reported yesterday that Kansas is projecting the state will generate $187 million less in tax revenue than expected over the next year. The report is slightly worse than the projections Kansas officials faced a month ago, which were slightly worse than the projections the month before that.
Looking further ahead offers little relief. The unexpected shortfall is poised to get worse: the same projections show tax collections nearly $300 million below expectations through mid-2017.
The AP report added that the latest fiscal forecast is "likely" to force the Republican-dominated state government to "consider larger tax increases than they had expected to balance the state budget." That's true, though as Max Ehrenfreund explained yesterday, who'll shoulder the burden makes a big difference.
One thing they're not considering: asking the wealthy to chip in. Instead, in a legislature that last week barred welfare recipients from using their benefits to go swimming or watch movies, the proposals that look most likely to succeed are sales and excise taxes that would be paid disproportionately by Kansas's poor and working class. [...]People who make less are more vulnerable to increases in sales and excise taxes, since they spend more of their money buying basic goods and services they need to get by. This is especially the case in Kansas, where food is subject to sales tax. Kansans can receive a tax rebate for their food purchases, but those who make nothing or too little to owe income tax aren't eligible. They pay the sales tax on food in full.
It's best to call this what it is: a redistribution of wealth, from the bottom up.
Under Brownback's economic plan, crafted by the infamous Art Laffer, the wealthiest Kansans received a tax break the state couldn't afford. The hope was prosperity would soon trickle down to everyone else, and the increased economic activity would fill state coffers. None of this, we now know, has come true.
But while GOP policymakers, after having already slashed state budgets, are now open to tax increases to repair the damage they've already inflicted, Republicans remain committed to the underlying ideology -- they can't ask the rich to give up their tax breaks because they're the "job creators" who fuel the economic engine.
If current plans come to fruition, policymakers much prefer to ask more from those at the bottom.
State officials, at least publicly, don't put it this way. Increased sales and excise taxes are applied evenly -- it's not as if the rich will pay a lower sales tax on their purchases than the poor, right?
In a literal sense, no, but let's not miss the relevant context. As Ehrenfreund's piece added, "In practice ... people who don't have much money can't save or invest it. They have to spend it to get along. The more you make, the smaller the fraction of your income you have to spend to cover the basics. And wealthier households, which spend more on luxuries and entertainment, can always give up some of their purchases and keep the money in the bank if they don't want to pay the higher rate. As a result, raising the sales tax equally for everyone means asking poorer households to pay significantly more, relative to what they earn."
Making matters slightly worse, proposed sales-tax increases probably won't be enough to cover Kansas' projected budget gap. They'll have to find more money somewhere else.
Some radical "experiments" carry severe consequences. Brownback's economic test is clearly one of them.