Tax Study Released Today

A new study on the ramifications of lowering the state income tax was released today at a statehouse news conference. Bernie Koch, executive director of KEPC, and study author Dr. John Wong presented findings at the statehouse today. The study finds that, for every 1 job created, 1.63 are lost due to study released today finds that a lowering of the income tax would result in a loss of 1.63 jobs due to a reduction in overall state spending. The study was commissioned by the Kansas Economic Progress Council.

The press release is available here, and the ful text of the study is available here.

Dr. Wong’s slide deck is available here.

KEPC UPDATE: Koch op-ed, $238M shortfall in 2016, contractors aim to protect transpo funds

In this issue …

  • Charles Koch op-ed in USA Today links to study critical of state tax cuts
  • Kansas faces $238 million shortfall by July of 2016
  • Contractors launch program to protect transportation funds



Charles Koch op-ed in USA Today links to study critical of state tax cuts

The online version of an August 6th USA Today op-ed by Kansas billionaire Charles Koch contains a link to a study critical of cutting state taxes as an economic development strategy.

Koch Industries and organizations that are Koch-supported are noted for their support of Kansas income tax cuts and opposition to legislators who opposed the cuts.

Entitled “How to really turn the economy around,” Charles Koch writes of the need to encourage principled entrepreneurship and eliminate the artificial cost of hiring caused by government programs like Obamacare.

He goes on to say:

“Third, we need to guide many more people into developing skills and values that will enable them to reach their potential.  Everyone knows education increases a person’s ability to create value.  But the willingness to work, an essential for success, often has to be taught, too.”

A sharp-eyed reader of this newsletter pointed out that when you click on the word “ability” in the online version of the Koch op-ed, it takes you to a report by the Economic Policy Institute from August of 2013 that is critical of state tax cuts to encourage economic development.

That’s exactly what Kansas did with the 2012 and 2013 income tax cut legislation.

Entitled, “A Well-Educated Workforce is Key to State Prosperity,” by Noah Berger and Peter Fisher, the report states, “Cutting taxes to capture private investment from other states is a race-to-the bottom state economic development strategy that undermines the ability to invest in education.”

Here’s one portion of the report that makes the point:

“While cutting costs to business has become the principal focus of economic development policy in many states, more and more states are cutting programs across the spectrum to lower state taxes. In many cases these ideas are promoted as a way to attract employers from other states—to steal jobs by offering incentives to business leaders. But the preponderance of evidence has shown that in the long run these strategies are inefficient and ineffective (Fisher 2013; Mazerov 2013; Lynch 2004). State and local taxes on business are simply too small a share of total business costs to play a significant role in location decisions; other factors—labor skills, wages, access to inputs and markets—are much more important. Yet business tax breaks are expensive, and take money from investments in education and infrastructure that increase productivity and support growth.”

The report goes on to say there is no clear relationship between state taxes (as a share of state personal income) and median wages, and that, “Overwhelmingly, high-wage states are states that have a well-educated workforce.”

The report reaches this conclusion:

“Does the correlation between education and earnings necessarily mean that states can strengthen their economies in the long run by adopting policies that increase the number of well-educated workers?  Recent academic work suggests that the answer is, ‘Yes.’”

The Economic Policy Institute is a non-profit think tank headquartered in Washington, D.C. which advocates for low and moderate income families in the United States.

Read the Charles Koch op-ed.

Read the Economic Policy Institute report.


Kansas faces $238 million shortfall by July of 2016

A new forecast by the nonpartisan Kansas Legislative Research Department predicts a Fiscal Year 2015 budget shortfall of $238 million.  That means the spending plan passed by the Kansas Legislature for the budget year that began July 1 will be short by $238 million, forcing either budget cuts or revenue increases.  Otherwise, Kansas will not be able to pay its bills.

The new forecast was released to legislators late last week and then to Statehouse reporters.  The last forecast was released in early May as the legislature ended.  It predicted a shortage by July of 2017.

The new forecast takes into account the fact that tax collections for April, May, and June were $334 million below official estimates.

Former state budget director Duane Goossen warned that the situation (brought on by the 2012 and 2013 state income tax cuts) was serious in his blog of August 4, just days before the new forecast.

Goossen wrote, “To keep the Kansas State General Fund solvent, lawmakers surely will have to limit spending—by hundreds of millions.  The education and human service programs that make up almost 90 percent of State General Fund expenses will bear the brunt of the cuts.”

Longtime Statehouse reporter Martin Hawver writes in Hawver’s Capitol Report:

“What does it mean?  Probably mid-year budget-cutting for the current and next fiscal year when the Legislature convenes.  Oh, and the possibility of increased taxes, if the current tax program doesn’t spur increased revenues.”

Our view here at the Kansas Economic Progress Council is that another option for legislators will be a massive raid on the state transportation program, diverting hundreds of millions of dollars to the state general fund.  That would certainly wreck the program and force a revisiting of the state’s entire spending plan for roads, transit, and other transportation investment and maintenance.


Contractors launch program to protect transportation funds

As state revenues decline and the possibility of a raid on transportation funds becomes more likely, the Kansas Contractors Association and the Associated General Contractors have unveiled a statewide advertising and education campaign designed to protect highway funding.

The two groups say the push comes amid concerns state officials will raid state transportation funds to cover the revenue shortfalls and, “as Washington can’t agree on a long-term approach to funding highway and transit projects.”

Bob Totten, executive vice president of the KCA unveiled new highway and semi-truck banner ads, website and other details of the campaign.  Mike Laird, president of BRB Contractors, Inc. spoke about how good roads are essential to business.  Brian Turmail, the national spokesman for the Associated General Contractors of America, talked about the need for a long-term federal highway and transit bill.


KEPC UPDATE: Standard & Poor’s lowers KS bond rating

Citing Kansas income tax cuts and a “structurally unbalanced budget,” Standard & Poor’s rating services has announced a one-level downgrade of its issuer credit rating (ICR) for the State of Kansas. S&P also announced a double-notch downgrade of Kansas’ appropriations-secured debt. In a news release, the service said, “The outlook on both ratings is negative.” […]

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KEPC UPDATE: WSU study questions cuts, rural roads more dangerous

In this issue … Wichita State study questions cutting taxes to grow the economy Kansas rural roads more dangerous   Wichita State study questions cutting taxes to grow the economy A detailed scientific study by two Wichita State economists questions cutting taxes as a way to boost state economies.  The research was published nationally in […]

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KEPC UPDATE: Revenue drop meaning; Nobel Prize winner critiques tax plan

In this issue … What the revenue drop means Nobel Prize winner criticizes Kansas tax cuts   What the revenue drop means The announcement that June revenues for the State of Kansas were $28 million below estimates brings the state close to a zero ending balance for the Fiscal Year that began this week. The […]

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KEPC UPDATE: State borrowing; Jordan: Revenue drop in June; Fiscal Cliff/Capital Gains; Medicaid expansion

State borrowing nearing Great Recession level Jordan says revenue will drop again in June Memo hints revenue drop was not all fiscal cliff/ capital gains Medicaid expansion with a Kansas twist   State borrowing nearing Great Recession level Former Kansas Budget Director Duane Goossen told a meeting of the Newton Area Chamber of Commerce last […]

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KEPC UPDATE: Leaders misstated economic research; Huge budget implications

In this issue … Kansas leaders misstated economic research according to quoted economist Goossen: hard decisions are close, budget implications are huge   Kansas leaders misstated economic research according to quoted economist An economist with the Rockerfeller Institute of Government at the State University of New York says Kansas officials have misrepresented her research about […]

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KEPC UPDATE: Ending balance shortfall, tax bills TMI, changes to PEAK

In this issue … Ending balance preview shows FY 2016 shortfall Tax bills-probably more than you want to know Changes to PEAK (Providing Employment Across Kansas)   We are still wading through the legislation produced by the 2014 Kansas Legislature and will have a final overall report on its activity sometime after the sine die […]

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KEPC UPDATE: Veto underway, revenues plummet, tax conference, Moody’s downgrade

In this issue … Veto session underway Revenues plummet Tax conference Moody’s downgrades Kansas bonds   Veto session underway The Kansas Legislature’s veto session is underway with House and Senate leaders aiming for as short a clean-up as possible, even to the point of rushing the budget bill, which has never been debated in the […]

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KEPC UPDATE: Ks ranks 45th, taxpayer ROI, veto session, tax bills, ending balance, medicaid, KEPC stays at work

In this issue … New businesses? Kansas ranked 45th in Kauffman Foundation Index Taxpayer return on investment (ROI) in Kansas Veto session begins Wednesday Tax bills still in conference What is the ending balance? KCEG says Medicaid expansion is good for the economy What we’ve been up to  JOIN KEPC TODAY and support the availability […]

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KEPC UPDATE: Short veto, tax policy, school finance, KEPC media, Goossen’s Blog, Odds and ends

In this issue … Short veto session? Tax policy undecided until veto session Details of school finance KEPC in the media for calling attention to report Duane’s Budget Blog Some odds and ends   Short veto session? The Kansas Legislature is adjourned until April 30, when the annual veto session begins.  Originally, the veto (or […]

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