Results of Kansas’ tax gamble are rolling in, and they are not good. Though advocates of substantial tax cuts promised a shot of adrenaline to the Kansas economy, so far it’s more like a shot of Valium. As Missouri lawmakers consider whether to override Gov. Jay Nixon’s veto of a similarly destructive income tax cut (House Bill 253), they should take heed and avoid following Kansas off its self-created economic cliff.
Since the tax cuts became law one year ago, Kansas has cut investment in education, reducing state aid to public schools by more than $300 per pupil over the next two years. Public colleges and universities have increased tuition, in some cases more than three times the rate of inflation. And Kansas has $365 million less revenue this year as compared to last, which means further cuts to education, public safety and other critical services. As even more tax cuts are phased in, impacts to these services will worsen.
These cuts to K-12 and higher education will seriously harm Kansas’ economy, as one of the key factors businesses consider when making location and hiring decisions is whether they have access to an educated, highly-skilled workforce. Funding cuts will also compromise the state’s transportation network and the safety of Kansas communities, impacting the very infrastructure that businesses need to be successful and which Kansans need to be competitive.
On top of the cuts to services that people depend on, Kansans are paying more in other taxes. The Kansas legislature increased sales taxes by $300 million per year, hitting the middle class and low-income people’s pocketbooks the hardest. State funding cuts have already forced many cities and counties in Kansas to increase local property taxes in order to avoid eliminating vital services. Douglas County increased property taxes to make up for lost state funding that paid for public safety and public health programs and many cities are debating whether to increase mill levies in order to continue providing basic public services to their communities.
Another damaging result of Kansas’ tax cuts has been its impact on the state’s credit rating. In June, concerned about the state’s ability to pay out existing bonds due to the tax cut, Moody’s downgraded the state’s credit rating. This can mean higher interest rates for bond repayments, harming the state’s ability to invest in important long-term projects like road repairs by making those projects more expensive. As a result, Kansans will pay more for basic government functions.
Kansas hasn’t seen much of a “shot of adrenaline” for the economy either. Since the tax cuts took effect, Missouri has added jobs at a faster rate than Kansas. And although many companies have reorganized in order to take advantage of tax loopholes, the state has seen little increase in net businesses. Similarly, in Missouri, HB 253 creates a new loophole for certain businesses to avoid paying taxes. While these changes do little to create jobs, they go a long way in eliminating revenue critical for key investments that do attract businesses, like quality education for a skilled workforce, an efficient transportation system, and safe, stable communities.
Missouri lawmakers are facing a big decision, but it shouldn’t be a tough one. If Missouri follows Kansas’ footsteps, average Missourians will face cuts to vital services they depend on each day and higher local taxes without any benefit to the economy — all in the name of giving the wealthy and corporations a big tax break.
Amy Blouin is Executive Director of the Missouri Budget Project, a nonprofit that conducts research and analysis of state budget, tax and economic issues to improve the quality of life for all Missourians.Annie McKay is the Executive Director of the Kansas Center for Economic Growth, a nonprofit that conducts research and analysis to promote balanced state policies that help ensure all Kansans prosper.