Amity Shlaes explains in a National Review Online column why those who question the economic value of tax cuts ought to look at the real evidence from Kansas.
… [L]ook at the struggle Governor Sam Brownback is suddenly having to win reelection in Kansas. Brownback did make tax cuts his “trick.” The governor led the state legislature in implementing a series of tax cuts that included a staged reduction in income-tax rates and the repeal of taxes on sole proprietorships. The state also took little steps to lure or keep business and families. Example: phasing out mortgage-registration fees. In other words, Brownback put out the welcome mat.
What were the results? Pretty good. Bureau of Economic Analysis data show that non-farm proprietor income, a.k.a. revenue from businesses, including corporations, LLCs, and sole proprietorships, rose 26 percent from the first quarter of 2011 to the first quarter of 2014. This rate is higher than those of neighbors Colorado, Missouri, Oklahoma, and Nebraska, and also higher than the nation’s average. Unemployment, every politician’s hot topic, is at 4.9 percent in Kansas, lower than in nearby Missouri, Ohio, and Illinois. According to state economists, the share of total jobs that are private-sector non-farm jobs has risen by 17 percent relative to early 2011. That’s a signal that Kansas is turning to commerce.
As it happens, there’s actually a natural experiment that showcases the results of Brownback’s work: The Kansas City metro area straddles the border between Kansas and a higher-tax state, Missouri. In the period since Brownback began his reforms, Kansas City, Kansas, known as “KCK,” saw a higher rate of new private jobs relative to population than did Kansas City, Mo., “KCMO.”
Other evidence of success: Kansas’s gross domestic product in the last quarter available, the fourth quarter of 2013, grew at an annualized 3.1 percent rate over the preceding quarter, faster than the rate for Oklahoma, Missouri, or Nebraska. Kansas moved up to number 15 from number 32 in the ALEC–Laffer ratings for state competitiveness. Last month, evidence of Kansas’s stand-out performance popped up in a Bureau of Labor Statistics chart noting that 24 states saw unemployment increases, whereas 15 had decreases, with 11 states showing no change. A sub-chart, titled “States with unemployment rates significantly different from that of the U.S., August 2014,” listed Kansas among the rare states that saw a sharply lower unemployment rate. Among the others: Washington, D.C., where government is a big employer. Such details warrant further scrutiny in coming years.
Shlaes goes on to address critics’ charges about a fall in anticipated government revenue in Kansas. It’s a criticism that should sound familiar to North Carolinians who have followed this state’s debate about tax reform.
