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The Kansas revenue problem in perspective

If we take the budgetary advice of a former Kansas state budget official, we need to be ready to accept the economic stagnation that accompanied his boss’s tenure.

Writing in his blog, former Kansas budget director Duane Goossen offers his advice for fixing the Kansas budget: “The state has a revenue problem that will not fix itself. Lawmakers have to face up to the fact that they must make revenue match expenditures. Unaffordable income tax cuts caused the problem. That’s the place to look for a correction.” (Lawmakers Make It Clear: Kansas Has A Revenue Problem)

Goossen has one thing correct: revenue and expenditures must be equal, over any long period of time. The preference for Goossen, as we see, is to raise revenue to support more spending. We can’t afford tax cuts, he writes.

But this is a backwards way of looking at the relationship between government and its subjects. When someone says we can’t afford tax cuts, that presumes a few things. First, it presumes that the previous level of taxation was better than the current level.

Second, it presumes that tax cuts have a cost that can’t be afforded. The only way this is true is if we believe that the state has first claim on our incomes. The state takes what it believes it needs, and we get to keep the rest. Then if, somehow, the government is persuaded to give any of that claim back to us, this “gift” has to be paid for.

But for those who believe in self-ownership, this is nonsense. It’s the people who “give” tax money to the government, not the government who “gives” it back in the form of tax cuts. If the government cuts taxes, the government gives us nothing. It simply takes less of what is ours in the first place.

Growth of jobs in Kansas and nearby states. Click for larger version.

Growth of jobs in Kansas and nearby states. Click for larger version.

But the attitude of many government officials is the opposite. In 2006 Kansas cut taxes on business equipment and machinery. At the time, the Wichita Eagle reported: “Gov. Kathleen Sebelius, a Democrat, who first proposed the business machinery tax cut, agreed. ‘We’re not giving away money for the sake of giving it away,’ she said. ‘I’m hoping that the economic growth will actually help fund the school plan that we just passed.'” (emphasis added) (Lawmakers hope for growth)

Growth of gross domestic product in Kansas and nearby states. Click for larger version.

Growth of gross domestic product in Kansas and nearby states. Click for larger version.

For the former governor of Kansas, letting business firms keep a little more of the money they earn means the state is “giving it away.” By the way, Duane Goossen — who now believes the only solution for the Kansas budget is to raise taxes — was the state’s budget director when Sebelius said the state is going to “give away money” in the form of tax cuts.

If take Goossen’s advice and return to the tax rates of the Sebelius and Graves eras, let’s make sure we understand the economic growth Kansas experienced during those years. Nearby is a snapshot of Kansas job growth starting when Bill Graves became governor, along with growth in some nearby states. A chart of GDP growth starts in 1997, two years into the Graves administration. We don’t want to return to these levels of growth.

If you’d like to use the interactive visualizations of this employment and GDP data, click here for employment, and click here for GDP.