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Kansas experiment

The Kansas experiment was a name given to a controversial and widely noted tax-cutting policy/agenda of Kansas Governor Sam Brownback that began with Brownback signing a bill cutting state taxes, in May 2012, and ended with the Kansas legislature's repeal of the bill in June 2017. It was one of the largest income tax cuts in the state's history. The Kansas experiment has also been called the "Great Kansas Tax Cut Experiment", the "Red-state experiment", "the tax experiment in Kansas", and "one of the cleanest experiments for how tax cuts affect economic growth in the U.S." The cuts were based on model legislation published by the conservative American Legislative Exchange Council (ALEC), supported by supply-side economist Arthur Laffer, anti-tax leader Grover Norquist, and the influential industrialists Charles and David Koch. The law cut taxes by US$231 million in its first year, and cuts were projected to total US$934 million annually after six years, by eliminating taxes on business income for the owners of almost 200,000 businesses and cutting individual income tax rates.

History
Background 's 2009 campaign poster for the 2010 Kansas gubernatorial election As a conservative Republican Senator from Kansas, Brownback had been reelected by large margins in 1998 and 2004, and had also run briefly for president in 2008, withdrawing before the primaries began. In 2010 he ran for governor, defeating his Democratic opponent Tom Holland 63.3% to 32.2%. Also winning a sweeping victory in 2010 in Kansas was the Tea Party movement of the Republican party, whose members largely shared Brownback's views and who made up most of the Republican majority in the 2010 Kansas House of Representatives—the largest majority in half a century. Some Kansans interviewed by a journalist and Burdett Loomis, a political scientist at the University of Kansas, speculated that Brownback hoped that, after his failed first attempt in 2008, the success of the tax cuts would help launch another campaign for the presidency. Kansas Senate Bill Substitute HB 2117, "one of the largest income tax cuts in Kansas history", Initial reception As the bill was signed, supporters predicted an economic revival in Kansas, while opponents predicted an unparalleled budget crisis. Brownback stated the plan would deliver a "shot of adrenaline" to the Kansas economy. His administration projected the creation of 23,000 jobs a year in Kansas in addition to those created by natural economic growth. After signing the bill, Brownback argued that the cuts would pay for themselves through the increased revenue resulting from boosting the state's economic growth. He also called it a "red-state experiment". in 2015 In the spring of 2014, monthly revenue for state government "crashed", and fell "massively short of projections". warned that job creation and economic growth in Kansas were lagging those of its neighboring states. Nonetheless, many conservative sources were enthusiastic. The Wall Street Journal published an op-ed by Brownback where he called his experiment "A Midwest Renaissance Rooted in the Reagan Formula", compared his tax cut policies with those of Ronald Reagan, and announced a "prosperous future" for Republican-dominated Kansas, Oklahoma, and Missouri. Influential anti-tax activist Grover Norquist defended Brownback's tax cuts as "the right thing for the economy", and claimed that Kansas was in better economic shape than the tax-cut critics alleged, and that the state had "provided a model, a successful model, that will phase out the income tax." Results By early 2017, Kansas had "nine rounds of budget cuts over four years, three credit downgrades, missed state payments", and what The Atlantic called "an ongoing atmosphere of fiscal crisis". Budget and revenue , which saw drastic budget cuts. Wyandotte High School in Wyandotte County, Kansas (pictured) was among the public schools hit hardest by Brownback's tax cuts. By 2017, National Public Radio reported state lawmakers were seeking to close a $900 million budget gap, Earlier efforts to close budget gaps had left Kansas "well below national averages" in a wide range of public services from K-12 education to housing to police and fire protection. eliminating school programs, cutting maintenance, phasing out teaching positions, School districts were consolidated and some schools were closed. This first transfer of funds had already caused the Kansas Department of Transportation to "indefinitely delay" two dozen road expansion projects in April 2016. According to Kansas State Senator Carolyn McGinn, "we've had pretty good roads, but now we're starting to see the deterioration." Kansas became the only state without a state-funded arts commission, and closed nine social service offices around the state. S&P downgraded its credit rating first from AA+ to AA in August 2014, due to a budget that analysts described as structurally unbalanced, and again in February 2017 from AA to AA−. Jobs and growth By 2018, overall growth and job creation in Kansas had underperformed the national economy, neighboring states, and Nebraska. In January 2014, following the passage of both tax cuts, the Nebraska labor force grew by a net 35,000 non-farm jobs through April 2017, compared to only 28,000 in Kansas, which has a larger labor force. Davis was endorsed by over 100 former and current Kansas Republican officials who criticized Brownback's leadership. Brownback managed to defeat Davis by 3.69 percent, a decline from the more than 30% margin he had gained in his first governor's race victory, thanks at least in part to effective campaign ads attacking Davis for his brief detention during a 1998 police raid of a strip club. Brownback's popularity continued to suffer in Kansas after his re-election as governor. Three separate polls between November 2015 and September 2016 ranked Brownback as the nation's least-popular governor, the September 2016 poll showing an approval rating of 23%. Two years later, "a wave of moderate Republicans" opposed to the tax cuts replaced many of the conservative supporters of the experiment in the state legislature. Repeal unanimously ruled that Brownback's deliberate underfunding of public schools caused by tax cuts and revenue drops was unconstitutional. By 2017, after a protracted battle, overriding Brownback's veto of them. By April 2017, 66% of Kansans told pollsters they disapproved of Brownback's job performance, with 27% still approving. After "years of dealing with budget" shortfalls by borrowing, "quick fixes" and consumption tax hikes on tobacco, fuel, and other consumer goods, The Senate passed bill SB 30 (38–0 with 2 not voting) on February 2, 2017. Three weeks later, the House passed SB 30, as amended (123–2). Shortly after Brownback vetoed this first attempt, the legislature attempted to override his veto but came up three votes short in the Kansas Senate. The measure was estimated to boost state taxes by $1.2 billion over two years, in part by raising the top income tax rate from 4.6% to 5.7%, and by restoring the pass-through business tax. In the 2018 Kansas gubernatorial election, the Republican candidate, conservative Kris Kobach, promised to "try to roll back the tax hikes" of the 2017 legislative session, and urged a return to "a more low-tax structure like we had from 2013 to 2016" during the Brownback administration. He told voters that "Kansas doesn't have a revenue problem. Kansas has a spending problem." ==Impact==
Impact
Lessons Despite its record and the fact that "many experts regard the Kansas tax cuts as a failure", the 2017 Republican tax cuts (Tax Cuts and Jobs Act of 2017) had some of the same elements of Brownback's policy, and "many Republicans still embrace the ideology" behind the Kansas tax cuts. "the kind of fiscal policy the Trump administration wants to enact nationally", Kansas Republicans commented on the relationship between the two cuts. State Representative Stephanie Clayton asserted that "the real example" the Kansas experiment provides to the rest of the country is that "the voters will get angry with you, and it doesn't matter how solid-red your state is." This was a sentiment repeated by William G. Gale of the Brookings Institution, who stated that one of the most important implications of the Kansas experiment for federal tax reform is "not to expect tax cuts to boost the economy much, if at all". According to the Center on Budget and Policy Priorities, the bill cut the taxes of "the wealthiest 1% of Kansans by 2.2%", while it projected that the poorest 20% of Kansans would see "their taxes increase by 1.3%". Bryan Lowry of The Wichita Eagle estimated that almost 70% of Kansas lawmakers, as well as Governor Brownback and his wife, benefited personally from the tax cuts through business or property that they owned, which being non-wage income, was exempt from taxes under the 2012 law. ==Explanations and defense==
Explanations and defense
Explanations offered for problems According to critical observers, part of the reason for the large revenue loss was that the new 0% tax rate on pass-through business income was "exploited" and had "become a loophole" for taxpayers. Another source of exploitation is thought to be "tens of thousands" of workers who previously paid individual income tax but re-titled themselves as "independent contractors", claiming their remuneration was actually business income and now tax-free. Applying multiple tests, including the synthetic control method within a difference in differences framework, the study found that the reduction in state and local government expenditures resulted in negative economic multiplier effects and increased economic uncertainty. by many observers. Governor Brownback rejected criticism of his cuts or needs to adjust the law, declaring the cuts a success, and blaming perceptions to the contrary on a "rural recession" and on "the left media", which he said "lies about the tax cuts all the time". It also defended the tax cuts by citing a low unemployment rate, which was 3.7% as of June 2017, and "considerable small-business formation" in Kansas. It called the complete elimination of "pass-through" taxes a mistake that resulted in less revenue than projected because it created a loophole allowing consultants, law practices, and accounting firms to avoid taxes. For the Cato Institute, Daniel J. Mitchell wrote on how the experiment revealed that "many Republicans" are actually "pro-tax big spenders" but said a "long-run" victory for the experiment since the post-repeal tax rates will still be "significantly lower" than before the Brownback experiment. It agreed that Republicans should not claim that "tax cuts pay for themselves". The Center on Budget and Policy Priorities dismissed conservative explanations for what Michael Mazerov described as the "failure of 'supply-side' tax cuts, writing: "Former supporters have offered explanations for this failure to prevent the Kansas experience from discrediting 'supply-side' economic strategies more broadly. But the evidence does not support these explanations. Rather, the Kansas experience adds to the already compelling evidence that cutting taxes does not improve state economic performance." == See also ==
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