Republicans Surprised That Tax Cuts Result in Revenue Shortfalls

By SAM URETSKY

Two carps about the 2013 movie Man of Steel. First, the title. Superman wasn’t The Man of Steel, he was The Man of Tomorrow. The Man of Steel was Steel Sterling, an early Archie/MLJ character. Granted DC owns the character now, and anyway you can’t copyright titles, but fair is fair, Steel Sterling got the name first. Secondly, in the movie, Superman says “I grew up in Kansas, General. I’m about as American as it gets.” Kansas?

In Thomas Frank’s primer on modern political and economic thinking What’s The Matter With Kansas? he makes the point that in our political discussions, we’ve replaced economic analysis with a quest for authenticity. Republicans are our kind of people on social issues, so they’re probably okay on economics. Maybe. It led to more Democrats watching NASCAR, although they probably did it with a six pack of Belgian Trappist Ale (actually, if you’re in Kansas, try some of the Free State brand craft beers. They’re from Lawrence, Kan., and have really excellent products. Think globally, drink locally.)

There are dozens of varieties of Republicans – there’s no more uniformity in that group than any other – but the unifying force seems to be a deep aversion to taxes. Even the highway bill, which should have been a simple issue, was approved using a bit of hocus-pocus accounting. Instead of raising taxes to cover the essential expense of maintaining the national highway system, congress resorted to “pension smoothing.” Corporations will be allowed to set aside less money for pensions, which will increase profits and raise business tax receipts. So the answer to an essential need is to underfund pensions. Corporations can do that without government assistance.

Still, all Republicans believe in low or no taxes, although it’s not always clear why. One argument is that low taxes starve the government and we’d be better off with little or no government. On Aug. 19, the FDA recalled some nut butters that were being sold at Trader Joe’s and Whole Foods because of salmonella contamination. There were other recalls for salmonella, a couple for listeria, and some products that may be susceptible to botulism. On the 22nd, the Consumer Product Safety Commission recalled bean bag chairs that had killed two children. Recalls.gov has the whole list. Fix roads, keep us from being poisoned, what are some other things the government should stop doing?

But the alternative reason for cutting taxes is that the less you tax, the higher your tax receipts will be, and that’s actually being tested. In Kansas. In 2012, Gov. Sam Brownback and the Kansas legislature went on a voyage of exploration in terms of the effects of tax cuts. First the legislature cut individual tax rates by 25% and eliminated the tax on sole proprietorships. Last year they cut taxes even further as part of a five-year plan. The Center on Budget and Policy Priorities said it nicely: “Some tax cut proponents claim that a state’s economy will respond so powerfully to tax cuts that the state will actually take in more revenue with the tax cuts than without them. This claim has no backing in the serious economic literature, however. In truth, there’s no free lunch: when states cut taxes, they lose revenue. That’s certainly what has happened in Kansas.”

On Aug. 18, the Kansas City Star headlined “New jobs reports shows Brownback’s tax-cuts promises still failing.” The paper compared the rate of jobs growth in Kansas, 0.5% with the rate of growth in Missouri, 1.2%. which, by the simple device of not cutting taxes, isn’t suffering the budget shortfalls that have hit Kansas. The Garden City Telegram editorialized that “Schools statewide still are being shortchanged, and significant state revenue shortfalls driven by Brownback’s tax cuts for the wealthy only will exacerbate the problem.” The Hutchinson, Kan., News expressed concern for the rural hospitals, essential to the well-being of rural population. These hospitals are having trouble dealing with budget cutbacks and conditions are just made worse by Gov. Brownback’s refusal to expand Medicaid.

Kansas has simply made itself America’s laboratory on irrational economics. Both Moody’s and Standard & Poor’s have cut the state’s bond ratings and projected that there might be further cuts. Gov. Brownback was renominated on Aug. 5. He has pledged that if re-elected he’ll push for more tax cuts. The Governor has said that the tax cuts will usher in an era of prosperity. It’s just going to take a little bit longer.

And when it’s over, and the people of Kansas decide that they’ve taken all they can and the lesson was learned, somebody will say that the tax cuts weren’t deep enough and the trial period wasn’t long enough, because, as Superman knows, that’s the American way.

Sam Uretsky is a writer and pharmacist living on Long Island, N.Y. Email sdu01@outlook.com.

From The Progressive Populist, October 1, 2014