Kansas Screwed Up. We Can Too.

Remember how Kansas became heaven overnight after they slashed the income tax? Me either.

Let’s try again.

Setting the stage for an overhaul of a state tax system requires fiddling at the margins of policy rather than blowing up everything at once. So, much as taxing wages is a bad idea, it takes a long time to get into a bad situation, so it follows that it should take a teensy while to get out.

The Kansas “experiment” is a classic Rorschach test. Advocates of robust taxation and government spending observed a fiscal disaster. Advocates for cutting taxes (supply-side acolytes Arthur Laffer and Steve Moore) declared the experiment didn’t have time to work. 

A careful reading of foundation/think tank pieces from both sides of the political divide agrees that one aspect of the reform (getting rid of the business pass-through) provided a double benefit to high earners who also had their income taxes cut. It’s safe to say that Kansas probably screwed up when it cut both forms of taxation and then hesitated to cut the state budget.

By 2015 when the experiment ended (sort of), revenues increased again, and all was okay throughout the land. Not quite! Lacking the resolve to restore all the income tax cuts, Kansas increased its sales tax. With local governments allowed to have a sales tax, rates are bumping or passing 10%. It’s a comprehensive tax as well: it covers food and other groceries.

Kansas Redux

That little bit of history ought to encourage caution, but many border and southern states didn’t get the memo. There’s a plan in Mississippi (yes, the sickest and poorest state in the US) to cut the budget in the 2021 session and introduce an eventual elimination of the state income tax. The chances of a revenue disaster like Kansas? No problem, they’ll make up for it by increasing the sales tax, already at 7%, with local options for more.

Mississippi has alternatives, which they likely will not explore: property taxes. Mississippi enacted the first sales tax in the nation in 1930. The rationale was to lower property taxes. Lower taxes for who?  In the 1930s (and today), the primary landowners have held it mostly for mineral rights, timber, or corporate agriculture. Mississippi’s Delta land, which had significant black ownership in the early 1900s, was stolen and is now in gentlemen farmer/developers’ hands. Suffice to say; those industries don’t need many workers anymore. It’s a hell of a place to live.

Last year, the progressive mayor of Jackson, Mississippi, tried exploring land value tax. So far, he and his talented staff are stymied at every turn just trying to get property ownership information. And the band played on.

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