The failed Kansas tax experiment

First, a happy thought: There is a lawyer in Trump’s administration named Ty Cobb. Why do I find this amusing? There is also a baseball player from way back in the day named Ty Cobb and he… had a history, shall we say?

Cobb’s legacy, which includes a large college scholarship fund for Georgia residents financed by his early investments in Coca-Cola and General Motors, has been somewhat tarnished by allegations of racism and violence, largely stemming from a couple of largely-discredited biographies that were released following his death. Cobb’s reputation as an extremely violent man was fanned by his first biographer, sportswriter Al Stump, whose stories about Cobb have been discredited as sensationalized, and in some part proven to be entirely fictional,while Cobb’s views on race evolved and mellowed after his retirement from baseball.

I mean come on! If I were writing a book about a racist governmental leader I wouldn’t even think of calling his attorney “Ty Cobb” and yet here it is. Truth is stranger than fiction.

Before we go to the cesspool on a more national level, I want to expose the microcosm that is Kansas. Don’t get me wrong I have zero issue with Kansas. None. I have never been there in my adult life. I do know, however, that the governor tried that whole “Trickle Down Economics” thing republicans are always harping about and it failed. Miserably. I want to share the info I found with you because, after all, knowledge is power. You can Google “Kansas Failed Tax Experiment” or just click these links (here and here) or take my word for it. Honestly, you should read for yourself and decide but I will continue on.

SCROTUS and his cronies have a BS tax bill they want to shove down the citizens throats. Kansas already tried the exact same plan and it didn’t work out. Think that will stop them? Of course not. But let’s look at Kansas.

Elements of the president’s updated proposal mirror pieces of the tax-cut plan that Republican Gov. Sam Brownback pushed through the state legislature in 2012, promising it would deliver a “shot of adrenaline” to the Kansas economy.It didn’t. Instead, revenues crashed, forcing Brownback and lawmakers to resort to spending cuts, borrowing and accounting tricks to maintain a balanced budget.

“Are you kidding me,” says University of Kansas political scientist Burdett Loomis. “I think it is pretty clear that the Kansas experiment was a failure.”

William Gale of the centrist Brookings Institution called the Kansas tax cuts “a lab test for how supply side tax cuts may work at the federal level.”

Not well, he concluded.

“The Brownback plan aimed to boost the Kansas economy, but instead led to sluggish growth, lower than expected revenues and brutal cuts to government programs,” Gale wrote.

Now, before we make this all one-sided, there are some planned differences between Kansas and what SCROTUS is doing. For example, SCROTUS’s proposal wouldn’t exempt pass-through income but it would lower the rate that high-earning professionals in business partnerships pay to 25 percent but I don’t believe for an instant that one difference is going to make the federal version of the tax experiment successful.

And for those of you who have zero clue what a pass-through income looks like, the NY times has the best explanation:

In December 2014, the University of Kansas agreed to pay David Beaty $800,000 a year, plus incentives, to be the football program’s head coach, but with an interesting structure: More than two-thirds of that pay would be channeled to an organization called DB Sports L.L.C.

DB Sports is what accountants call a pass-through entity, and it pays all of its profits directly to Mr. Beaty. As a result of a tax law that Kansas lawmakers passed in 2012, ostensibly to benefit beleaguered small businesses in the state, that contract structure allowed Mr. Beaty to avoid paying about $37,000 a year in state income taxes, nearly enough to fund a first-year teacher’s salary in the Wichita school district.

You can call it whatever you want but it appears to be a tax break for the wealthy:

A team of researchers from the University of South Carolina and other institutions who studied the impact of the tax change found the top 2 percent of Kansas earners reaped the largest gains from shifting income to pass-throughs.

The top federal rate is 39.6 percent, offering a significantly bigger incentive for tax avoidance if pass-throughs are taxed at 25 percent. Already, 70 percent of pass-through income flows to the top 1 percent of American income earners, Owen Zidar, an economist at the University of Chicago Booth School of Business, has found.

Read it again. The TOP ONE-TWO PERCENT. Nothin says middle class like being in the top one or two percent.

Mr. Beaty, the Kansas football coach, was able to shield at least $575,000 a year from income taxation by routing that money through his limited liability company, according to state records. (That amount grew to $1.375 million a year in a contract extension Mr. Beaty signed in December 2016.) Next year, as a result of the recent change in state law, Mr. Beaty will face a tax liability of nearly $80,000 on his pass-through income.

Anyway, Kansas ended up getting a financial beat down because as the plan was failing, there were calls to roll back the parts of the plan that were doing the most damage. The Governor said, politely, eat a dick. Instead, he slashed university budgets, cancelled highway projects and convinced lawmakers to borrow $1 billion to shore up the state’s public pension fund. The good people of the Wheat State showed their disagreement by voting out pretty much all Republicans (and any democrat who was okay with the current situation). I foresee this happening at a national level regardless of lawmaker support of the potential tax proposal.

I want to thank Kansas for being the sacrificial lamb to show the rest of the United States why the tax plan won’t work, and I’m sorry that not only did that state end up in financial shambles, as one lawmaker worded it, but that no one will listen.

One thought on “The failed Kansas tax experiment

  1. What I don’t understand is that people keep buying that tax breaks are a good thing, when nothing good comes from them. Besides that people are ignorant and think they want to hate the government and don’t realize what those taxes are paying for, say for instance the public schools your kids attend, not having a blackwater type agency running the police, not having to worry that you’ve made your payment to the fire department, etc. Which maybe if they taught that some taxes are necessary, and those that can afford to pay it, should pay their fair share and not find every loophole to avoid them. But in school, the one thing that you remember learning about taxes is the Boston Tea Party, so from the beginning, you’re taught taxes are bad. And like when Bush gave the tax rebate, those who don’t make a lot of money rejoice because they’re getting money back, which makes them feel better about the republicans that are screwing them because, hey, they got free money, the government is looking out for them, which it’s their money to begin with. Going off on a tangent since I brought up low income people, which I know logic is out the window these days. If companies paid their employees more, say a living wage, they could therefore buy more stuff at the places they work at, thus making more money for the corporations that run it, ie more gold toilets and private jets. Instead of repressing them and having the government subsidize their low pay. Or the even sadder issue of teachers having to work multiple jobs to feed their families. But that’s a whole other super size can o’worms. Now back to Jen.

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