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March 12, 2013

Be careful what you wish for governor

Kansas is experiencing tax cut first hand

Here’s a story to consider: A Republican governor with ties to the Tea Party and possible presidential ambitions decides he wants to slash the state’s income tax rate but is met with massive resistance from legislative leaders from his own party.

Sounds like the scenario playing out in the Indiana Statehouse, right?

But I’m talking about Kansas Gov. Sam Brownback.

Last year, Brownback fought a bitter battle with Republicans who control the Kansas legislature over his proposal to cut the state’s income tax rates. He won, after arguing the cut would spur the state’s economy and after shoving aside lawmakers’ concerns about the significant hit it would take on state revenues.

One of his strongest allies in the fight: Americans for Prosperity, a conservative  group funded by Charles and David Koch, billionaire brothers and influential conservative leaders who donated more than $200,000 to Indiana Gov. Mike Pence’s campaign.

Last week, the head of AFP announced a “six-figure” ad-buy campaign targeting Indiana Republican lawmakers who’ve resisted Pence’s call for a 10 percent cut in the state income tax rate. Like their Kansas colleagues, they’re worried about the hit it will take on the state budget: $750 million over the next two years, and $500 million a year after that.

Pence wants what Brownback got: A cut and a compliant legislature (the latter achieved after AFP and Brownback targeted in primary races the moderate Republicans who opposed his tax cut.)

But there’s more to the story. As chronicled in a recent Wall Street Journal story, Brownback is now stuck with mess.

Kansas’s official state economic forecasting agency projects that Brownback’s income tax cuts — which brings the rate down from 6.45 percent to 3 percent over five years and eliminates the tax for 200,000 small businesses – will result in a series of revenue shortfalls that add up to $2.5 billion by 2018. That’s a 20 percent projected drop in five years.

Kansas, like Indiana, is required to balance its budget, so lawmakers face the prospect of making painful cuts to public services or finding other ways to raise revenue.

To make up for the loss, Brownback is now pushing some unpopular proposals. He wants the Kansas legislature to make permanent what was supposed to be a temporary increase in the state sales tax, and he wants to eliminate two popular deductions, including the state write-off for home-mortgage interest payments.

He’s getting major pushback to those proposals from traditional allies, including the Kansas Chamber of Commerce.

Brownback is still convinced that his tax cuts will eventually pay for themselves by spurring economic growth, but time isn’t on his side.

In January, a Kansas court ruled that Brownback’s education budget was unconstitutional and ordered the governor to boost school funding by $400 million. The court said it was “illogical” for the state to argue that it couldn’t adequately fund schools at the same time it slashed income taxes.

Also in January, Bloomberg reported Kansas’ uncertain budget outlook had hurt its standing in the bond markets.

Brownback’s standing with voters is hurting as well. The independent, nonpartisan Public Policy Polling survey in February found Brownback, who is up for re-election next year, had a -15 job approval rating, with 37 percent of Kansas voters approving and 52 percent disapproving of his performance as governor.

Tax cuts are easy promises for politicians to make, even when they run counter to the economic interests of the majority of people they serve. What’s the matter with Kansas could become a Hoosier story line under Gov. Pence: What’s the matter with Indiana?

Maureen Hayden covers the Statehouse for the CNHI newspapers in Indiana. She can be reached at maureen.hayden@indianamediagroup.com

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