Kansas City Star. February 5, 2024.
Editorial: Kansas’ revenue is down a 3rd month straight. This is no time for the GOP ‘flat tax’
Everybody loves a tax cut. But timing matters.
Democrats and Republicans in the Kansas Legislature both brought big tax-slashing plans to Topeka this year. GOP leaders have been pushing a proposal centered around a so-called “flat tax” — an initiative apparently designed to bestow most of its benefits on the super-rich — while Gov. Laura Kelly and a bipartisan group of lawmakers offered their own proposal to cut property and income taxes for most Kansans.
Both plans would cost upward of $1 billion over the next few years.
No matter your politics, a tax cut of some sort seemed like a good idea coming into this legislative session. The state has run robust budget surpluses in recent years, thanks to a booming economy and pandemic-era largesse from the federal government. If a government can provide needed services and return some cash to the taxpayers at the same time, it should do so.
There are now signs, though, that Kansas leaders should slow down and take a deep breath.
Why? Because those robust surpluses don’t seem quite as robust anymore. The Kansas Department of Revenue on Friday reported that tax receipts in December came in $64 million below expectations — the third straight month that state revenues have fallen short of projections.
That should be a red flag moment for the tax cut crusade.
Kelly used the news to criticize the GOP flat tax proposal — she vetoed the GOP bill last month, but Republican efforts remain alive — and advocate for her own.
“Coming short of the estimates for the third month in a row emphasizes that tax cuts must be done in a fiscally responsible way,” Kelly said Thursday. “The bipartisan tax package that I’ve proposed to the Legislature provides substantive and direct tax relief to all Kansans without putting at risk our overall economy.”
She’s at least half right.
We have long been dubious of the GOP’s beloved flat tax. Yes, its benefits would disproportionately accrue to the state’s richest earners — one estimate suggests that Wichita billionaire Charles Koch would get an $875,000 tax break under the plan — while delivering relatively meager gains to middle-class Kansans. We are also old enough to remember the national embarrassment brought upon the Sunflower State by former Gov. Sam Brownback’s “tax experiment,” which drained state coffers and pushed Kansas public schools to the breaking point.
That experience means that any new Republican proposal to once again radically restructure the Kansas tax system should be viewed with a healthy skepticism. And that’s particularly true now that revenues are less certain than they seemed before.
There is more to like in Kelly’s proposal, which would keep the current three-tiered tax structure but still increase the standard dedication for Kansas income taxpayers.
Both the Republican and Democratic plans, however, come with hefty price tags. Kelly’s proposal would cost more than $1.1 billion over three years. The GOP bill would be even more expensive, slashing $1.6 billion from estimated revenues.
The question now is whether Kansas can afford those kinds of cuts.
Our suggestion: If taxes are to be lowered, then start small and focus on areas of agreement.
Democrats and Republicans both are ready to finish the job of “axing the tax” on groceries today instead of a year from now, and both sides also want to end the taxation of Social Security benefits. Those moves would deprive the state of relatively small amounts of revenue while helping Kansas families and retirees — good policy outcomes that everybody seems to like.
The downside: Those cuts don’t offer the pure political joy that comes with slashing income and property taxes. But they do let both sides show voters that they’re serious about delivering excess revenues back to taxpayers. And they give Kansas leaders time to see if the drop in current tax revenues is just a short-term fluke, or a long-term problem.
Tax cuts are popular. Kansans know from bitter experience what happens when those cuts go too far, too fast. Now is the moment for caution.
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