Op-Ed: Upside-Down Tax Plans Would Weaken Ky.
November 15, 2016
Tuesday’s election means total Republican control of state government with the party gaining a majority in the House for the first time in 95 years. Now the governor and legislative leaders say tax reform is among their issue priorities, which they hope to accomplish between now and the end of the 2018 session.
But what those leaders are talking about so far is not tax reform at all, but more tax breaks and giveaways to powerful interests — holes in the tax code that real reform would reduce. Far from helping our budget and economy, the kind of changes being discussed would sink us deeper into debt and diminish the foundation of good schools, health, infrastructure and more we need to prosper.
In interviews with media outlets over the last few days, the governor and top leaders have discussed shifting away from income taxes toward sales taxes, getting rid of the inheritance tax and the tax on business inventory, and creating more tax breaks for corporate special interests – all of which are designed to benefit those at the top. Though we haven’t yet seen a detailed plan, these are proposals they’ve floated in the past.
And they’re right out of the playbook states like Kansas and North Carolina have implemented recently to disastrous result.
In 2012, Kansas enacted what their governor called a “real live experiment” in slashing income and business taxes that he claimed would be “a shot of adrenaline in the heart of the Kansas economy.” Instead, revenues have plummeted leading to huge cuts to schools and other services and two downgrades of the state’s bond rating. Far from flourishing, Kansas’ economy and employment are growing less than half as fast as U. S. growth. And all that for a tax cut of $21,000 on average for the richest one percent.
North Carolina tried the same approach in 2013 with the same devastating consequences — a $2 billion hit on the state budget over the next five years meaning fewer kids in preschool, textbook shortages in classrooms and huge hikes in community college tuition. And North Carolina also gave a big tax cut to the wealthy while raising taxes on the poor and middle class.
These plans are backed with a promise that the growth fairy will reward the state with jobs as companies and entrepreneurs flock to set up shop. But that never materializes because state taxes don’t play a significant role in where people and businesses locate and grow, as research shows. Instead, the keys to job growth are the education, infrastructure and quality of life factors that are undermined when tax breaks drain the revenue stream.
A Kentucky plan has been in the works behind closed doors for months, with the governor receiving advice from Art Laffer, notorious advocate of failed trickle-down economics and architect of the Kansas plan. As The Courier-Journal recently reported, Laffer and his co-authors and allies donated over $160,000 to House races.
We can’t afford to go down Laffer’s yellow brick road. The public investments Kentucky needs to build an economy that works for everyone have been eroded already by the Great Recession and the failure of the legislature to clean up the tax code. The problem has been made worse by skipping regular payments to public employee pensions.
A tax plan that further weakens our budget through more giveaways to the powerful would leave our students, families and communities behind and create an even bigger mess we’d be cleaning up far into the future.