Claims by controversial, supply-side economist Arthur Laffer that recently enacted state income tax cuts will bring a new wave of prosperity to Kansas were branded "junk" today by the chairperson of the state Democratic Party, who was joined at a Statehouse press conference by leaders of the teachers' union and a University of Kansas tax specialist.
"Like the fairy tale about the emperor's new clothes...someone needs to stand up and point out that this tax plan is part of Laffer's fairy tale and is built on a base of assumptions that cannot succeed," said Joan Wagnon, Kansas Democratic Party chairperson and a former state revenue secretary.
Also speaking against the income tax cuts signed into law in May by the governor were Karen Godfrey, president of the Kansas-National Education Association, Mark Desetti, chief lobbyist for the teachers' union, and KU law professor Martin Dickinson who has written newspaper commentaries criticizing the tax cuts.
The biggest tax breaks in Kansas history are scheduled to become effective in January, though the potential benefits to businesses touted by the governor could be delayed by technical errors in the authorizing legislation that will require the 2013 Legislature to revisit the law.
Wagnon said Thursday's press conference was called to counter comments made by Laffer during an appearance with Brownback on Tuesday in Overland Park, where the men praised the law at a gathering of about 260 people, most of whom were members of the business community.
The new law is expected to reduce the income tax liabilities of more than 1 million Kansas tax filers and entirely exempt from income tax the owners of about 190,000 businesses.
Dickinson said the tax cuts would be unfair to low-income Kansans and others and will put the state in a category with Alabama and Mississippi, the only other states that tax food sales but don't provide offsetting food tax credits for the poor.
According to analyses of the new law prepared by state revenue officials and legislative tax specialists, the average income tax break for people earning between $25,000 and $50,000 a year - the largest category of Kansas tax filer - would be $226.19. The average tax break for those earning $250,000 a year or more would be $9,791.85. About 21,000 filers fall in that highest income category.
The pocketbooks of about 288,000 Kansans are expected to directly suffer as a result of the tax plan, according to the analyses. Those Kansans number among the state's poorest and would take hits due to the elimination of tax credits targeting low-income people who end the year owing no income taxes. On average, those tax filers would see credit reductions in a range between $110 and $127 each.
Wagnon took aim at a report published by the American Legislative Exchange Council and authored by Laffer. The report claims that over a 10-year period the nine states without an income tax have economically outperformed states with relatively high income tax rates. Wagnon said Laffer used statistics selectively and inaccurately to make his case.
The report has been criticized along the same lines by various economists, some of whom were cited by Wagnon.
Wagnon noted that among Brownback's stated goals as governor were increasing median household income and school performance. She said by those measures, the no-tax states lagged Kansas.
Godfrey and Desetti said they opposed the tax cuts because they will undermine the state budget and force cuts to public school spending. When fully in place, the cuts are expected to decrease state tax collections by about $850 million a year.
"We know these tax cuts will cause enormous losses in the public sector," said Godfrey, who came to Kansas from Alaska, one of the no income-tax states touted by Laffer and Brownback. "So, we're going to experiment with this untested plan hoping to create private-sector jobs knowing that as a consequence we're going to lose public-sector jobs. People talk as though public-sector jobs are undesirable. Those are our policemen, our firefighters, our educators, our case managers. Those people are important to our communities."
A public relations worker for the Kansas Department of Revenue attended the press conference and handed out a prepared statement from Revenue Secretary Nick Jordan. It repeated Brownback's pledge that core government services would remain intact.
"While opponents of tax reform try to roll back the clock with scare tactics and their belief in bigger government," Jordan said, "Gov. Brownback is committed to funding core government services such as education, public safety and social service, while also looking forward to job creation and economic growth. Kansas is open for business."
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