Kansas: A Case Study in Shrinking Government
Republican Governor Sam Brownback of Kansas created a vivid real world case study of what happens when we implement a radical low tax, low regulation regime that slashes the size of government.
It was, as Brownback said, “a real, live experiment” on the validity of supply-side economics—the notion popularized by Arthur Laffer that allowing wealthy people to contribute significantly less in taxes is not just the secret to creating prosperity for all, it is a moral imperative.
Prosperity did not follow.
In 2010 Brownback rode the Tea Party wave into the governor’s mansion with 63% of the vote, along with Republican majorities in both houses of the Kansas legislature. He had a mandate. After taking Laffer on board as a consultant to help design his tax program, in January 2013 Brownback eliminated the top tax bracket, repealed state income taxes completely on the more than 100,000 owners of pass-through businesses, and ostensibly cut tax rates across the board.
(However, when the 2015 sales tax increase is included, taxpayers in the bottom 40 percent saw their taxes increase overall, according to an analysis by the Institute on Taxation and Economic Policy.)
Laffer’s theory, which began gaining currency in the late 1970’s, and became endorsed by every conservative politician since Reagan, was that slashing taxes will boost investment, raise employment, and jump-start the economy. In fact, these tax cuts (just like Paul Ryan’s cuts, subsequently enacted at the Federal level in 2018) were promised to juice economic growth so much that they would pay for themselves.
The Republican governor and house legislature of Kansas also enacted a conservative wish list of policies aimed at shrinking government further: eliminating four state agencies and 2,000 government employees, privatizing the delivery of Medicaid, and instituting strict welfare requirements.
After the tax cuts’ first year in effect, in 2014 Kansas lost $688 million in tax revenue and saw its bond rating cut. Job growth of 1.1 percent trailed the neighboring states of Missouri with 1.5 percent, and Colorado with 3.3 percent.
Perhaps it just takes time for the growth impacts to kick in? In January 2015 when Brownback started his second term, he promised to add 25,000 private sector jobs per year each year for his second term. In 2015 that number turned out to be 14,200, or 0.1 percent. Job growth for the nation was 1.9 percent.
Between April 2016 and April 2017 Kansas was one of only four states to lose private sector jobs, according to analysis by Arizona State University’s Seidman Research Institute. Kansas saw a growth rate of -0.53 percent (a loss of 9,400 jobs), while the growth rate for the United States overall was 1.6 percent.
Personal income growth also suffered. Kansas enjoyed income growth of 6.1 percent between 2010 and 2012, ranking 12th in the nation. But under Brownback’s “pro-growth” policies, that declined to 3.6 percent between 2013 and 2015, slipping to 41st in the nation. By the end of 2016, Kansans’ average hourly earnings had fallen 2.5 percent, while national hourly earnings grew by 0.8 percent. State GDP grew at a third of the national rate, while neighboring Illinois’ GDP grew by 50 percent more than the national rate.
The Kansas economy grew slower under Brownback’s government shrinking policies than neighboring states, the country itself, and even Kansas’ own growth in previous years. He managed to turn a billion-dollar surplus into a billion-dollar deficit.
University of Kansas political scientist Burdett Loomis argues “This failure probably cost us $4 billion.”
In 2015 the combination of slashed revenues and services saw six school districts end their years early because of lack of funding. This led to a court case that found such underfunding unconstitutional, which became part of the overwhelming public pressure that eventually led to the Republican-controlled legislature raising taxes by $1.2 billion over two years—over Brownback’s veto.
By November 2016, Brownback enjoyed an approval rating of 26 percent, the lowest of any governor in the United States. If Kansas is the model example of what happens when you slash government taxes, regulations, programs, and investments, it’s clear that Americans are in dire need of a different paradigm to ensure our continued safety, health, happiness, and prosperity.