On June 8, Kansas Gov. Sam Brownback discusses the frustrations of being forced to call a special session of the Legislature to prevent schools from being closed.

On June 8, Kansas Gov. Sam Brownback discusses the frustrations of being forced to call a special session of the Legislature to prevent schools from being closed.

Kansas cut taxes, California raised them. What happened?

  • News Analysis By Jim Tankersley and Max Ehrenfreund The Washington Post
  • Saturday, June 18, 2016 6:24pm
  • Local NewsNation / world

In 2012, voters in California approved a measure to raise taxes on millionaires, bringing their top state income tax rate to 13.3 percent, the highest in the nation. Conservative economists predicted calamity, or at least a big slowdown in growth. Also that year, the governor of Kansas signed a series of changes to the state’s tax code, including reducing income and sales tax rates. Conservative economists predicted a boom.

Neither of those predictions came true. Not right away — California grew just fine in the year the tax hikes took effect — and especially not in the medium term, as new economic data showed last week.

Now, correlation does not, as they say, equal causation, and two examples are but a small sample. But the divergent experiences of California and Kansas run counter to a popular view, particularly among conservative economists, that tax cuts tend to supercharge growth and tax increases chill it.

California’s economy grew by 4.1 percent in 2015, according to new numbers from the Bureau of Economic Analysis, tying it with Oregon for the fastest state growth of the year. That was up from 3.1 percent growth for the Golden State in 2014, which was near the top of the national pack.

The Kansas economy, on the other hand, grew 0.2 percent in 2015. That’s down from 1.2 percent in 2014, and below neighboring states such as Nebraska (2.1 percent) and Missouri (1.2 percent). Kansas ended the year with two consecutive quarters of negative growth — a shrinking economy. By a common definition of the term, the state entered 2016 in recession.

Other effects of the Kansas tax cuts, which were meant to spur entrepreneurship, are well-documented.

While state officials anticipated that the reductions would create a shortfall in the state budget, tax revenues have been consistently below even those expectations. Standard &Poor’s and Moody’s Investors Service have signaled that they could reduce Kansas’s credit rating, indicating there is a chance the state cannot pay its bills.

The shortfalls have forced Republican Gov. Sam Brownback and lawmakers to make additional adjustments. The state canceled the initial reduction in sales taxes, then increased them again, while delaying additional scheduled reductions in the income tax.

On the whole, Brownback’s policies modestly increased taxes for the poor and working class, who pay more in sales taxes than income taxes, while reducing taxes drastically for the rich.

The poorest 20 percent of households — those making less than $23,000 a year — are paying about $200 more, on average, according to an analysis by the Institute on Taxation and Economic Policy in Washington. For the middle class, the changes have been a wash, with less-affluent households paying somewhat more and more-affluent households giving up a little less.

Meanwhile, the wealthiest 1 percent of households, those making at least $493,000 a year, are saving an average of $25,000.

Kansas’s gross domestic product is still less than it was at the end of 2011, said Menzie Chinn, an economist at the University of Wisconsin, who has been following Kansas’s economy. Meanwhile, the economy in the rest of the country continues to expand.

“It’s remarkable,” Chinn said.

It is perhaps less remarkable — or surprising — that California has powered along. The recovery nationwide has favored massive metropolitan areas stocked with high-skilled workers, which is to say places such as Los Angeles, San Jose and San Francisco. The damage from California’s deep housing crash has slowly healed in places such as the Central Valley.

Still, the noncoastal regions of California lag far behind Silicon Valley and Los Angeles in their job and growth recoveries. The state’s median income remains below pre-recession levels after adjustment for inflation, although it still beats the national average.

Few, if any, economists would say today that the recovery has been sufficient for all Californians. But almost no one can say that raising taxes on the rich killed that recovery. Or that given a choice between the two states’ economic performances over the past few years, you’d rather be Kansas.

Talk to us

> Give us your news tips.

> Send us a letter to the editor.

> More Herald contact information.

More in Local News

A Mukilteo Speedway sign hangs at an intersection along the road on Sunday, April 21, 2024, in Mukilteo, Washington. (Ryan Berry / The Herald)
Long live the Speedway! Mukilteo’s main drag won’t be renamed

The public shot down the mayor’s idea to change the name: 77% voted ‘No’ in an online survey, with 95% opposed on Facebook.

Everett
Motorcyclist dies in crash on East Marine View Drive in Everett

Around 8 p.m. Tuesday, a motorcycle and a vehicle crashed into each other at the intersection of 11th street and East Marine View Drive.

Logo for news use featuring the municipality of Darrington in Snohomish County, Washington. 220118
Motorcyclist dies in crash on Highway 530

Jeremy Doyle, 46, was riding east near Darrington when he crashed into the side of a car that was turning left.

The Marysville School District office on Thursday, Aug. 31, 2023 in Marysville, Washington. (Olivia Vanni / The Herald)
‘Financially insolvent’ Marysville schools to get unprecedented oversight

Superintendent Chris Reykdal will convene a first-of-its-kind Financial Oversight Committee, he wrote in a letter Tuesday.

Woodside Elementary Principal Betty Cobbs on Monday, June 17, 2024 in Bothell, Washington. (Olivia Vanni / The Herald)
Everett’s first Black principal retires after 51 years

In her office, Betty Cobbs kept a black-and-white photo of herself at age 5: “I am right there, with dreams of becoming an educator.”

Junelle Lewis, right, daughter Tamara Grigsby and son Jayden Hill sing “Lift Every Voice and Sing” during Monroe’s Juneteenth celebration on Saturday, June 18, 2022. (Olivia Vanni / The Herald)
On Juneteenth: ‘We can always say that there is hope’

The Snohomish County NAACP is co-sponsoring a celebration Saturday near Snohomish, with speakers, music and food.

Rep. Rick Larsen speaks at the March For Our Lives rally on Saturday, June 11, 2022, in Everett, Washington. (Olivia Vanni / The Herald)
Larsen kickoff in Everett canceled over fear of pro-Palestinian protesters

The event had been scheduled to take place at the Scuttlebutt Brewing Taproom on Monday night.

After 3 years in jail, Camano murder suspect’s trial delayed again

In February 2021, prosecutors allege, Dominic Wagstaff shot and killed his father, shot his brother’s girlfriend and tried to shoot his brother.

The access loop trail on the Old Sauk Trail on Monday, May 27, 2024 in Darrington, Washington. (Ta'Leah Van Sistine / The Herald)
10 accessible trails to explore this summer in Snohomish County

For people with disabilities, tree roots and other obstacles can curb access to the outdoors. But some trails are wheelchair-friendly.

Everett NewsGuild members cheer as a passing car honks in support of their strike on Monday, June 24, 2024 in Everett, Washington. (Olivia Vanni / The Herald)
Everett Herald newsroom strikes amid layoffs

“We hope that people who live in these communities can see our passion, because it’s there,” said Sophia Gates, one of 12 Herald staffers who lost jobs last week.

A person wears a pride flag in their hat during the second annual Arlington Pride at Legion memorial Park in Arlington, Washington, on Saturday, July 22, 2023. (Annie Barker / The Herald)
Judge blocks parts of Washington’s new parental rights law

The South Whidbey School District is among the plaintiffs in a lawsuit over the law giving parents access to counseling records for their children.

Logo for news use featuring the municipality of Gold Bar in Snohomish County, Washington. 220118
Fire destroys Gold Bar home along U.S. 2

The sole resident was not home at the time of the fire. No one was injured.

Support local journalism

If you value local news, make a gift now to support the trusted journalism you get in The Daily Herald. Donations processed in this system are not tax deductible.