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ITEP report says race to no income tax based on flawed theory

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The effort by Gov. Sam Brownback and several other Republican governors to eliminate personal state income taxes is based on an economic theory that is "extremely flawed," a new report by a non-partisan research group says.

Brownback has depended on the claims of supply-side economist Arthur Laffer that states without personal income taxes are outperforming those with state income taxes. Last year, Brownback hired Laffer for $75,000 to help draw up the governor's tax proposal.

But the Institute on Taxation and Economic Policy says income tax cuts don't appear to actually stoke state economies.

"In reality, states that levy personal income taxes, including the states with the highest top rates, have seen more economic growth per capita and less decline in their median income level over the last 10 years than the nine states that do not tax income," the ITEP report states. "Unemployment rates have been nearly identical across states with and without income taxes."

Laffer's claims are based on growth in Gross State Product, which is related to population trends, and he asserts that tax policy is behind the migration of people into low-tax states.

But ITEP says population growth in states isn't determined by tax policy. The report says the growth is more attributable to low housing prices, warm weather and high birth rates in those states.

The ITEP study looks at median family income, which shows that while income has declined in most states over the past decade, the declines have been smaller in states with income taxes. Five of the nine states without income taxes are doing worse than average in median income growth.

And ITEP says that Laffer's theory fails to take into account that some states don't choose to levy an income tax because they have an unusual economic resource, such as oil, coal or tourism.

Here is a link to the report: http://itep.org/itep_reports/2013/02/states-with-high-rate-income-taxes-are-still-outperforming-no-tax-states.php#.UTIP-b-xeRY

Comments

Bob_Keeshan 1 year, 1 month ago

Given the amount of time Trabert spends on here defending a partisan politician, you would think his organization's tax exempt status would be in question.

He is clearly advocating for Sam Brownback and like minded legislators. His is a political organization, not a policy organization, and as such should be subject to taxes.

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Richard Heckler 1 year, 1 month ago

Last year, Kansas used workers' withholding taxes to bribe AMC Entertainment with a $47 million payment to move its headquarters from downtown Kansas City, Missouri, to a KC suburb on the Kansas side, just 10 miles away. What a ripoff! (((AMC Entertainment has since been sold to Dalian Wanda Group of China. )))

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yourworstnightmare 1 year, 1 month ago

We are given magical fairy tales when what is needed is fact and evidence based decision making.

Are you listening, Dorothy?

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Richard Heckler 1 year, 1 month ago

Arthur Laffer is offering a theory nothing more that is for sure. Supply Side economics is voodoo economics which brings about wreckanomics and lots of debt. Supply Side Economics is supported with borrowed money.

Arthur Laffer is a D.C. beltway name aka the father of Supply Side Economics. Borrow and spend,borrow and spend,borrow and spend = wreckanomics and supports big debt. Arthur Laffer was a prominent figure in the Reagan-Bush administrations. His theories have left millions of Americans unemployed.

For example.

In the end big debt and super duper bailouts HAVE BEEN the results which does not seem to bother Republicans, as long as they are in power. In fact, by the time the second Bush left office, the national debt had grown to $12.1 trillion:

--- This GOP ENTITLEMENT - Over half of that amount had been created by Bush’s tax cuts for the very wealthy.

--- This GOP ENTITLEMENT - Another 30% of the national debt had been created by the tax cuts for the wealthy under Presidents Reagan and George H.W. Bush.

--- This GOP ENTITLEMENT - Fully 81% of the national debt was created by just these three Republican Presidents. http://www.dollarsandsense.org/archives/2010/0111orr.html

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Centerville 1 year, 1 month ago

This 'non-partisan' group is operating off a flawed assumption: that money taken from the economy and given to the government is money well spent. That, very obviously, is untrue. But, nice try.

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Paul R Getto 1 year, 1 month ago

Magical thinking is OK in church, but magic will not make a budget.

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Sam Crow 1 year, 1 month ago

So, Rothschild calls the Institute on Taxation and Economic Policy a non partisan group? Whenever I see such a statement, I seek out who runs, and is affiliated with, such a group. An examination of the ITEP shows the following:

From their website, the board of directors comes from “academia and labor”. The vice president of the group is Robert Kuttner, editor of the publication The American Prospect, which describes itself as “a journal of liberal ideas, committed to a just society, an enriched democracy, and effective liberal politics". The five member board includes the very liberal Robert Reich, Berkley professor famous for his position as Labor Secretary in the Clinton administration.

ITEP board member Nicolas Johnson is also with the group Center on Budget and Policy Priorities. In the CBPP, Johnson is Vice President for State Fiscal Policy. Johnson was a democrat staff member for the U.S. Senate Committee on Agriculture.

The president of the CBPP is Robert Greenstein, who has held high ranking positions in the Carter, Clinton, and Obama administrations. The vice president is T. Scott Bunton, who was a senior advisor to Senators Robert Byrd and John Kerry. This group is full of former staff members to democrat administrations and congress members.

So Scott, please spare us the crap about the ITEP being a “non-partisan research group”. It is a liberal think tank, interconnected to other liberal groups, advancing its position by issuing “reports” such as this one.

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To Sides 1 year, 1 month ago

If you currently deduct the amount of Kansas income tax from your federal Gross Income and next year you don't have a Kansas income tax deduction, doesn't that mean you will have a higher federal adjusted gross income and higher federal tax?

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chicago95 1 year, 1 month ago

Thanks to Scott Rothschild for bring this report to light.

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JayhawkFan1985 1 year, 1 month ago

Poor Dave Trabert. The Dunning Kruger Effect illustrates that he just doesn't know what he doesn't know. But, we know that repetition of a fallacy doesn't make it true. Maybe if Dave would go back to school and get some fancy book learning he would understand more...oh yeah, public education and higher education will be gone by then.

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msezdsit 1 year, 1 month ago

Brownback never cared if there was evidence that eliminating income tax would work as he falsely claimed it would. He was only interested in eliminating state income tax. So, for Brownback, he is still in the right. Brownback's real interest was eliminating all the things a state income tax historically supported. Say, for example, public education.

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John McCoy 1 year, 1 month ago

Here in Texas, there is no state income tax. Instead, we have one of the most onerous property taxes in the nation. And, buddy, you had better pay those high taxes, or the sheriff will come and sell your house right out from under you. The average 3/2/2 in our county will cost you over $3,400 in property tax the 1st of Jan. each year. You had better find the money. I personally would rather pay a state income tax based on the federal tax owed.

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yourworstnightmare 1 year, 1 month ago

These tax cut fairy tales combined with the increased spending of Brownback relative to Parkinson will catch up with Kansas.

Deep cuts to things like schools, roads, social programs. This is the result that Brownback and others want, smaller government. The quality of life in Kansas will plummet, and no businessperson in their right mind will want to relocate employees to the state, especially in high tech industries that require an educated work force.

This is an unpopular result, so he is using the fairy tale of supply side economic nonsense (tax cuts = more revenue via magical job creation) to cover his political tracks.

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tomatogrower 1 year, 1 month ago

When the recession hit in 2008, those states who relied on sales tax revenue were hurting. People weren't spending as much. Yes, income tax revenue drops when people are laid off, but not nearly as bad as the sales tax.

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Milton Bland 1 year, 1 month ago

I am sick of so called financial/economics experts. Thirty years ago my wife and I hired an "expert" to guide us into retirement years, HUGE MISTAKE! Our federal government has been using "expert" economist for decades. Look where we are. Maybe it is because I was one of Harry Shaffer's students back in the 60's, but I say dump all the college educated advisers and choose a decision making process that is a lot cheaper and works just as well. Brownback needs a Weegie Board.

1

yourworstnightmare 1 year, 1 month ago

Economic fairly tales promulgated by those who stand to benefit.

I just hope our collective memory will recall these shenanigans when the Kansas economy and budget tanks.

Brownback and his supply-side fairy tale actions will be to blame.

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smileydog 1 year, 1 month ago

Non Partisan research ITEP is funded by George Soros.

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question4u 1 year, 1 month ago

This is a report from a non-partisan research group. Other non-partisan reports project huge deficits for the Kansas budget in the years to come. A non-partisan report has just predicted slow growth to state economies in the Midwest over the next six months despite changes in tax structure.

There's no question that some people will benefit from Brownback's tax plan: the nearly 190,000 business owners who will pay no state income tax.

Everyone else should be concerned by this non-partisan research, and especially by the lack of non-partisan research to the contrary. Of course, if you're the kind of adult who believes in Santa Claus...

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grandnanny 1 year, 1 month ago

In response to ibroke, I hope you were being sarcastic. If not, I feel for you. Understanding basic facts is a higher-level thinking skill that takes some time to perfect. If you were being serious, then I hope you don't own a home because you may start to notice a hugh increase in property tax. Also, we are about to lose the home mortgage deduction so home ownership will be out of reach for many anyway.

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chootspa 1 year, 1 month ago

Countdown to Trabert whining about this in 3...2....1....

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ibroke 1 year, 1 month ago

I dont believe the report YOU KEEP THE GOOD WORK SAM BROWNBACK!!

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