By Max Ehrenfreund
June 7, 2017
Republicans in Kansas broke ranks with the state’s conservative governor Wednesday night, voting to raise rates and put an end to a series of tax cuts. The GOP revolt is a defeat for Gov. Sam Brownback, who overhauled the state’s tax system beginning in 2012, bringing down rates and causing repeated, severe budgetary shortfalls.
Kansas’s legislature is overwhelmingly Republican, but moderate GOP lawmakers joined with Democrats, overriding Brownback’s veto of a bill they’d already passed once that would raise taxes again by $1.2 billion over two years. Eighteen of the state’s 31 GOP senators and 49 of the 85 Republican members of the House voted against the governor.
The legislation undoes the essential components of Brownback’s reforms, which he famously described as part of a “real-live experiment” in conservative governance.
Brownback had reduced the number of brackets for the state’s marginal rates on income from three to two. The legislature will restore the third bracket, increasing taxes on the state’s wealthiest residents from 4.6 percent to 5.2 percent this year and 5.7 percent next year.
Marginal rates on less affluent Kansan households will increase as well, from 4.6 percent to 5.25 percent by next year for married taxpayers making between $30,000 and $60,000 a year and from 2.7 percent to 3.1 percent for those earning less than that.
The legislation also scraps a plan to bring those rates down even further in future years, one of Brownback’s promises to conservative supporters.
Finally, the legislature eliminated a cut Brownback had put in place to help small businesses. Analysts said that the provision had become a loophole, as many Kansans were able to avoid paying taxes entirely by pretending to be small businesses.
Initially, the state forecast that about 200,000 small businesses would take advantage of the break. As it turned out, about 330,000 entities would use Kansas’s new rule. That discrepancy suggests that tens of thousands of workers claimed that their incomes were from businesses they owned rather than from salaries.
“What we were able to do in the last 24 hours can allow us to start down that road, to begin repairing all the damage done after living with Gov. Brownback’s failed tax experiment for five years,” said Annie McKay, who is the president of Kansas Action for Children, an advocacy group in Topeka.
Wednesday’s vote was a rebuke not only for Brownback, but also for Republicans in Washington who have advocated similar cuts in taxes at the national level — including President Trump.
Proponents have argued that reducing taxes will stimulate the economy. “We have worked hard in Kansas to move our tax policy to a pro-growth orientation,” Brownback said in a statement on vetoing the legislation. “This bill undoes much of that progress. It will substantially damage job creation and leave our citizens poorer in the future.”
Since 2012, however, the pace of economic expansion in Kansas has consistently lagged behind that of the rest of the country.
Last year, Kansas’s gross domestic product increased just 0.2 percent, federal data show, compared with 1.6 percent nationally. That was an improvement for Kansas, though: At the end of 2015, the state was in what many economists would describe as a recession, with the economy contracting two quarters in a row.
The principles that Trump endorsed during the campaign and that he has stated again since becoming president are broadly similar to those enacted in Kansas. As Brownback did, Trump proposed reducing rates, reducing the number of brackets and allowing small businesses to pay a reduced rate.
That is no coincidence, since Brownback is well connected to the Republican policymaking establishment in Washington. Trump and Brownback have shared economic advisers, and when Brownback was a U.S. senator, Rep. Paul D. Ryan (R-Wis.), now the speaker of the House, served as his legislative director.