The great Kansas experiment continues...

[JustWinBaby]

Let's understand something.

Tax cuts are never revenue neutral. They usually do better than what is predicted, but I'm not going to debate if revenue neutral is the right measure.

The truth is outcomes [policy] is not stable. If you take a place like KS with above average employment, then it stands to reason that "trickle down" has limited (if not negative) value. Reagonomics worked because taxes and regulation were suffocating. I don't think that was the case with KS, so this policy was chasing very limited upside.

Taxes DO, trickle down. But, again, that's shouldn't be the decider. Nor should the arbitrary concept of "revenue neutral" be the decider.

In truth, federal and most states are "close" to optimal tax policy....things need to get pretty out-of-whack for there to be upside in a significant change. And that wasn't KS. Simply put, KS tried to ease when they should have been taking at a peak. You ease near the trough, and take near the peak...assuming revenue neutral is a goal (which I feel, itself, is fundamentally flawed).

I tend toward GDP growth....but that might be flawed in an era of [global] wealth gap expansion. Although that is another thread, traditional fiscal policy is definitely under pressure.

[Benton]

(06-07-2017, 05:54 PM)Belsnickel Wrote: Had to post quickly, so sorry for the opinionated piece. Just wanted to get this in so I didn't forget before I left work. The great Kansas experiment may be coming to an end.

https://www.washingtonpost.com/posteverything/wp/2017/06/07/its-a-great-day-kansas-legislature-pulls-the-plug-on-gov-brownbacks-failed-trickle-down-experiment/?tid=sm_tw&utm_term=.2b251a00f590

An old boss of my posted that last night. He also mentioned that California is proposing another tax increase despite economic growth.

[Belsnickel]

(06-08-2017, 10:10 AM)Benton Wrote: An old boss of my posted that last night. He also mentioned that California is proposing another tax increase despite economic growth.

I am more of a Keynes guy, and increasing taxes and spending less in good times and decreasing taxes and spending more in bad times is the way to go. This is simplified, but that's the gist of it, so makes sense to me.

[GMDino]

(06-08-2017, 11:37 AM)Belsnickel Wrote: I am more of a Keynes guy, and increasing taxes and spending less in good times and decreasing taxes and spending more in bad times is the way to go. This is simplified, but that's the gist of it, so makes sense to me.

I concur.

[JustWinBaby]

(06-08-2017, 11:37 AM)Belsnickel Wrote: I am more of a Keynes guy, and increasing taxes and spending less in good times and decreasing taxes and spending more in bad times is the way to go. This is simplified, but that's the gist of it, so makes sense to me.

That would be outstanding if true Keynesian economics is what the Fed and states practiced.  But in reality, they only implement the half that is either spend more or tax less (and, increasingly, BOTH)...in all situations.  This pattern, along with issues arising from too much debt, is probably what is leading to diminishing returns from stimulus spending.

Stable [fixed] tax rates may not always be optimal in different economic environments, but might still be superior for businesses (even individuals) with respect to planning and investment.


I'll go even simpler on Keynesian economics - surpluses and deficits are simply a result of the economic cycles where taxes are largely fixed and spending is steady at the rate of inflation growth.  The more aggressive version allows for stimulus spending but DOES NOT allow for long-term increases in debts/deficits (meaning you pay it back).

[JustWinBaby]

(06-08-2017, 10:10 AM)Benton Wrote: An old boss of my posted that last night. He also mentioned that California is proposing another tax increase despite economic growth.

CA revenues seem to be pretty highly correlated with the stock markets.  Also pretty clear that a tax rate that works in one state probably isn't right for another due to differences in the business environment (states with no income taxes - TX is highly dependent on oil/energy, NV and FL on tourism...TN I don't really know).

I do know if you compare overall tax burdens on the average American vs. the average European, it tends to be significantly lower across the board.  Social taxes to fund entitlement programs, I believe the average European pays something like 22% (vs. about 14.4% in the US).  Most of the EU has a VAT in excess of 20%, as well (vs. average state sales tax here of maybe around 7-8%).

[Belsnickel]

(06-08-2017, 05:35 PM)JustWinBaby Wrote: That would be outstanding if true Keynesian economics is what the Fed and states practiced.  But in reality, they only implement the half that is either spend more or tax less (and, increasingly, BOTH)...in all situations.  This pattern, along with issues arising from too much debt, is probably what is leading to diminishing returns from stimulus spending.

Oh, I absolutely agree. I have railed on about this at length with people. I suppose I should expect nothing less but bastardizing any sort of economic theory when it is implemented by elected officials.

[JustWinBaby]

(06-08-2017, 08:12 PM)Belsnickel Wrote: Oh, I absolutely agree. I have railed on about this at length with people. I suppose I should expect nothing less but bastardizing any sort of economic theory when it is implemented by elected officials.

It's another thread, and I've mentioned it before but I'm not entirely sure rising debt in OECD countries isn't partially just accounting for the global deflation dividend.  You're not supposed to be able to sustain these rates and debt levels without problematic inflation.....UNLESS the inflationary pressure is being offset with globalization....which would mean the govt pocketing that deflationary dividend is really a hidden tax.

However, it's not the case that growth in debt is all or even mostly intragovt (which is really a net of zero, i.e. Treasury owes the SS Trust).  Intragovt debt is like 40-50% of the total, which sounds a lot better except that SS debt might have to be sold/re-issued to the public to pay entitlements.  But the ratio hasn't increased that much, which means at least half the deficit is a very real liability we are accumulating.

[GMDino]

What...the...serious....fudge....

https://www.nytimes.com/2017/07/26/us/politics/sam-brownback-kansas-ambassador-international-religious-freedom.html

Quote:Sam Brownback, the beleaguered governor of Kansas, will be nominated to serve as ambassador at large for international religious freedom, the White House said in a statement on Wednesday.

Mr. Brownback, 60, a farm boy from eastern Kansas, represented his home state in Congress before being elected to two terms as governor beginning in 2011.

On Twitter, Mr. Brownback posted on Wednesday: “Religious Freedom is the first freedom. The choice of what you do with your own soul. I am honored to serve such an important cause.”

Melika Willoughby, a spokeswoman for Mr. Brownback, said he remained governor of Kansas as of Wednesday evening. She said there would a news conference on Thursday afternoon, but declined to comment beyond Mr. Brownback’s Twitter statement.

Lt. Gov. Jeff Colyer is expected to fill in for Mr. Brownback if his nomination is confirmed by the United States Senate. In the ambassadorship, Mr. Brownback would lead the Office of International Religious Freedom, which is under the umbrella of the State
Department and charged with promoting religious freedom as a foreign policy objective.


Mr. Brownback’s popularity has plummeted in recent years as the state slashed services and struggled to meet its revenue projections, problems that many blamed on Mr. Brownback’s signature tax-cutting doctrine. Despite Republicans’ dominance in Kansas, the party suffered losses in last year’s legislative elections.

Kansas lawmakers rolled back Mr. Brownback’s tax policies this year, with Democrats and moderate Republicans banding together to override the governor’s veto and raise taxes. Mr. Brownback has also clashed with some members of his own party on Medicaid expansion under the Affordable Care Act, which he vetoed this year.

Mr. Brownback’s policies were seen as a test of the Republican doctrine that lowering the tax burden on businesses would attract employers to the state and grow the economy. It was being closely watched by conservatives across the country to see how it might affect Kansas. But the growth never came.

Mr. Brownback will leave Kansas at a time of uncertainty over funding for public education. The Kansas Supreme Court is expected to rule soon on the constitutionality of the state’s new school funding mechanism.


“He leaves behind a legacy of failed leadership,” said Melissa Rooker, a Kansas House Republican who has been in the moderate wing and a frequent opponent of Mr. Brownback’s policies. She said she did not know what to expect from Mr. Colyer because he was not involved in the day-to-day dealings of the Legislature.

State Representative Jim Ward, the Democratic leader in the Kansas House, said he was “not surprised” to hear of the appointment, which has been rumored in Topeka for months.

“I’m not going to miss him,” Mr. Ward said. “He has left a state in carnage and destruction.”

Mr. Ward said that he believed the governor “had the background” for his new ambassadorship, but that “he hasn’t embraced diversity” consistently in Kansas. “Hopefully, this job that he’ll step into, he’ll realize that Americans are of all kinds of faith,” he added.

Ron Ryckman Jr., a Republican and the House speaker, said Mr. Brownback was “uniquely qualified” for the ambassadorship. “I wish him all the best in his new post and would like to express my gratitude for his extensive service to the State of Kansas.”

In announcing the intended nomination, the White House noted that Mr. Brownback, a former United State senator and representative, “worked actively on the issue of religious freedom in multiple countries and was a key sponsor of the International Religious Freedom Act of 1998.”

Mr. Brownback, a father of five, has also been a lawyer, a state secretary of agriculture and a one-time presidential candidate.

[BmorePat87]

(07-26-2017, 10:38 PM)GMDino Wrote: What...the...serious....fudge....

https://www.nytimes.com/2017/07/26/us/politics/sam-brownback-kansas-ambassador-international-religious-freedom.html

So many European nations haven't had American ambassadors nominated, but let's focus on what's important... ambassador for international religious freedom!

[Belsnickel]

I hate conspiracy theories and I want to give people the benefit of the doubt. However, I find myself believing it to be more and more likely that the Trump administration is intentionally attempting to damage our government in a substantial way. We are over six months in and the executive branch is so understaffed they have a hard time doing their jobs. Our reputation globally is taking serious hits from Trump himself, from Tillerson not knowing how to act as Secretary of State, and from a lack of staff in the foreign service.

I just really don't know how else to view all of this.

[GMDino]

(07-27-2017, 08:55 AM)BmorePat87 Wrote: So many European nations haven't had American ambassadors nominated, but let's focus on what's important... ambassador for international religious freedom!

I realized this morning this is the equivalent of a guy giving his friend a spot on his company's board of directors after the ther business started to go under.

Just a government offered golden parachute for a failed governor.

[Benton]

(07-27-2017, 09:15 AM)Belsnickel Wrote: I hate conspiracy theories and I want to give people the benefit of the doubt. However, I find myself believing it to be more and more likely that the Trump administration is intentionally attempting to damage our government in a substantial way. We are over six months in and the executive branch is so understaffed they have a hard time doing their jobs. Our reputation globally is taking serious hits from Trump himself, from Tillerson not knowing how to act as Secretary of State, and from a lack of staff in the foreign service.

I just really don't know how else to view all of this.

Eh, I dunno We're getting OT (or maybe not considering the thread), but there's a large group in the country that want it ran like a business. From what I can tell, it's mostly those who retired more than 10 years ago and haven't had a job lately. Why? Because they want the country ran like a business... which mostly means understaffed, out-sourced and only concerned about generating profit (which that last one should never be the goal of government).

[GMDino]

https://www.theatlantic.com/politics/archive/2017/10/tax-trump-kansas/542532/#ampshare=https://www.theatlantic.com/politics/archive/2017/10/tax-trump-kansas/542532/

Quote:'You Better Learn Our Lesson'
Kansas Republicans say they are worried that Congress and the Trump administration will repeat the mistake they made in enacting budget-busting tax cuts.

The regretful Republicans of Kansas have a message for the tax-cutting Republicans of Congress: Don’t follow our lead.
If states are, as Justice Louis Brandeis famously called them, the laboratories of democracy, then Kansas’s experiment in conservative tax reform set off an explosion of red ink. Steep cuts for businesses and individuals failed to produce a promised economic boom, and busted the state’s budget instead. Now, the GOP legislators that oversaw—and ultimately cancelled—that fiscal study are increasingly worried that Washington will ignore its central finding.


A tax-reform plan from the White House and Republican congressional leaders mirrors the structure of the legislation Kansas passed, and it’s been accompanied by the same confident assurances that it will “pay for itself” with economic growth. “That won’t work, so you better learn our lesson,” warned Kansas state Senator Barbara Bollier, a Republican who voted against the tax cuts originally and then fought to undo them earlier this year.

At the behest of conservative Governor Sam Brownback, Republican majorities in Kansas in 2012 set the state’s income tax on a “march to zero” and eliminated taxes on companies whose owners filed their taxes as individuals—a loophole exploited by thousands of businesses that resulted in plummeting revenue to the state’s coffers. Brownback, a former U.S. senator and presidential candidate, hailed the policy as “a real-live experiment” in conservative governance. But in the eyes of all but Brownback and his staunchest supporters, the test failed. Economic growth never materialized, and the state legislature could not summon the political will or overcome legal roadblocks to cut spending to match the lower revenue. With annual deficits in the hundreds of millions, Kansas has been mired in a perpetual budget crisis ever since.

The Death of Kansas's Conservative Experiment

“It was supposed to increase the GDP, and it didn’t. The feds will have that same problem,” said state Senator Jim Denning, a conservative who originally supported the tax cuts. In a phone interview, Denning told me he had done his own economic modeling in 2012 and “proved to myself that the tax cut would work.” But the new policy did not prevent a rural recession in Kansas or a dip in its oil-and-gas business. “It generated hardly any measurable economic activity,” Denning said. By the beginning of this year, he had changed course and voted along with Democrats and a coalition of Republicans to reverse most of the cuts, erasing Brownback’s economic legacy. (The governor won’t be in office much longer: He has accepted a diplomatic post in the Trump administration and will resign once he’s confirmed by the Senate.)

Bollier recalled that Republicans had first tried to offset the steep cuts in tax rates by eliminating deductions and exemptions in the Kansas code. But those proposals could not get through the legislature, exacerbating the resulting increase in the state’s budget gap. “You’ve got to have pay-fors. You can’t do it just by cutting taxes,” she concluded.


A similar debate is now playing out in Congress. Republican leaders, led by House Speaker Paul Ryan, wanted to raise as much as $1 trillion in revenue over a decade by instituting a border-adjustment tax, which would help pay for a reduction in tax rates for individuals and businesses. But conservatives rebelled, forcing Ryan to abandon the idea. The same fate could befall a proposal to raise more than $1 trillion by eliminating the state and local tax deduction, which is facing opposition from Republicans in high-tax states like New York, New Jersey, and California. Suggestions to pair tax cuts with reductions in spending on Medicare, Medicaid, and welfare programs are likely to go nowhere, too.


If Republicans in Washington can pass anything at all, it is likely to be a straight, temporary tax cut that adds to the deficit, which is easier for Congress to do because the federal government, unlike states, does not have to balance its budget. “That, to me, is a very poor decision,” Bollier said.


“They don’t think anything’s wrong with it, but then again, none of them actually live in Kansas anymore, so what do they know?”


Kansas Republicans do credit the national GOP for proposing more modest tax cuts than they ultimately enacted. The congressional plan calls for a one-time reduction in income taxes, while Brownback signed a law that set automatic decreases with the ultimate goal of eliminating the state income tax entirely. Kansas’s slashing of the rate for so-called “pass-through” entities, designed to bolster hiring at mom-and-pop businesses, proved to be even more of a budget buster. Nearly 400,000 businesses took advantage of the exemption, reducing the state’s annual tax revenue by between $200 million and $300 million, according to the nonpartisan Tax Foundation.


Republicans in Congress want to cut taxes for pass-through entities, too, but not by nearly as much. They have proposed lowering the cap on those companies to 25 percent, compared with the current top rate of 39.6 percent. Denning said the federal plan looks “way more responsible” than what Kansas did in virtually eliminating taxes on many small businesses.

It is that distinction that members of the Kansas congressional delegation have cited in defending the GOP tax plan. “While some may try to compare this tax-reform framework to what was tried in Kansas, the truth is these two reforms could not be more different,” Representative Lynn Jenkins, who sits on the tax-writing Ways and Means Committee, said in a statement.


But the concerns of Kansas state legislators go beyond the pass-through policy. They worry that Republicans in Congress, including those in the state’s own delegation, are basing their tax overhaul on the same underlying assumptions about economic growth that have been articles of faith for the party since the Reagan era but turned out disastrously in Kansas. 
“This is designed to shrink government. It is not designed to grow business,” state Representative Stephanie Clayton told me. 


“I’ve seen it. It shrinks government. It doesn’t grow business.”


She alleged that Kansas’s representatives and senators in Washington had shown no interest in learning about the state’s experience and were simply following the orders of the Koch brothers, the powerful GOP donors headquartered in the state. 


“They don’t think anything’s wrong with it, but then again, none of them actually live in Kansas anymore, so what do they know?” Clayton said of the delegation. (None of the members of the Kansas congressional delegation I contacted were available for interviews about the tax plan.)


The Kansas experiment still has its defenders, and chief among them is Brownback, who encouraged President Trump to use his plan as a model and accepted its demise only after the GOP-controlled legislature overrode his veto in June. The Koch-backed Americans for Prosperity hasn’t wavered, either; the conservative advocacy group has attacked state legislators for raising taxes in Kansas and campaigned aggressively for tax cuts in Congress, even at the expense of spiking the deficit. But some of the most influential believers in the revenue-generating power of tax cuts are now in the Trump administration. “Not only will this tax plan pay for itself, but it will pay down debt,” Treasury Secretary Steven Mnuchin said last month.

When I relayed that argument to Bollier, she just laughed. “I can only say: Look at Kansas,” she replied.