Brownback tells bankers he’s staying the course

Despite the state’s looming budget crisis, Gov. Sam Brownback gave an upbeat speech to the Kansas Bankers Association, saying the state is poised for economic growth, and vowing to continue on his course to eliminate state income taxes.

Speaking for about 20 minutes in a second-floor hallway at the Capitol, Brownback briefly noted that January revenues came in far below expectations, but focused only on the lag in sales tax collections, which he said was the result of a lackluster holiday shopping season that was felt nationwide.

But the $47.2 million revenue shortfall in January only added to an already dire budget situation. In November, state budget officials projected revenues would be $279 million short of what’s needed to fund this year’s budget. In response, Brownback ordered about $60 million in direct spending cuts in December and is now asking lawmakers to approve additional measures to close the remaining gap.

According to many analysts, the biggest contributor to the revenue shortfalls has been the sweeping income tax cuts enacted in 2012 and 2013. Supporters of those measures said they would spur rapid economic growth. And in his remarks to the bankers association, Brownback said he still believes in that theory.

“Because the pro-growth position in the United States is to be a right-to-work state with no income taxes,” Brownback said.

He told the bankers that he “cannot find a single study” to support what has often been called a “three-legged stool” of taxation in Kansas, a balance between sales, property and income taxes. “But I can find a lot of studies that point to, if you get that income tax rate down to zero, these are, long term, the states that grow the fastest.”

The most recent data from the U.S. Bureau of Economic Analysis, however, does not show a consistent pattern of above-average growth — as measured by their gross state products — in the seven states that have no income tax.

In 2013, when the U.S. economy grew at a sluggish rate of 1.8 percent, two of the seven no-income-tax states had even slower growth: Nevada at 1 percent and Alaska at -2.5 percent. Two other states that do not tax wages, but do tax interest and dividend income, also had below average growth: New Hampshire at 0.9 percent and Tennessee at 0.8 percent.

Most of the other no-income-tax states also had sluggish growth, although they were slightly above the national average: Florida at 2.2 percent and Washington at 2.7 percent. South Dakota and Texas saw growth rates in the 3-4 percent range.

Only Wyoming — whose entire population is roughly equal to that of Johnson County — stood out with a 7.6 percent growth rate, no doubt fueled by the new boom in domestic oil and gas production.

According to the website bankrate.com, which has information about the no-income-tax states, most of the states on the list have significantly higher state sales taxes than Kansas, or they have other significant sources of revenue such as the gaming industry in Nevada, or the petroleum industry, which funds nearly all of Alaska’s state operations.