Kansas - The Great Experiment Ends

[Ford]

Well that rather proves my point, which as nothing to do with the theories of Laffer. The state of Kansas didn't follow the "Total Taxes = Total Spending" equation when cutting direct taxes.

Here's what Kansas did: The cut out taxes ...

Let me stop you right there. I learned something very important from Jason's reply above. Yes, Kansas cut taxes, but they didn't cut Total Taxes. See what I did there? I capitalized the words, which is important. Kansas cut taxes, but they didn't cut Total Taxes, which is Totally Different. Had they cut Total Taxes as opposed to just taxes, the experiment would have Totally Worked.

 

[Deepak]

Since Total Taxes = Total Spending, the fact that they had a budget shortfall shows they didn't cut Total Spending and therefore didn't cut Total Taxes.

If you're going to cut taxes, you have to cut taxes. You can't redistribute the taxes and call it a tax cut.

It's the Laffer curve stupid - the entire premise is that by cutting taxes the increased economic activity will increase revenue so spending shouldn't need to be cut.

 

[Loren Pechtel]

Well that rather proves my point, which as nothing to do with the theories of Laffer. The state of Kansas didn't follow the "Total Taxes = Total Spending" equation when cutting direct taxes.

Here's what Kansas did: The cut out taxes on businesses believing that his would spurn more economic activity. Since businesses had extra money they believed that it would lead to more hiring. (This is wishful thinking because business owners don't tend to hire dead weight, but hire people when they need them.) These new employees would be making wages that could be tracked which would lead to more tax revenue. The did cut spending, but were surprised that the loss of revenue from taxes was greater than they had planned for. This lead to a downward spiral.

I think a lot of political nonsense could be solved by requiring the budget to be based on this year's income, not the anticipated income. Any error in this regard carries forward to next year's budget.

 

[Jimmy Higgins]

Well that rather proves my point, which as nothing to do with the theories of Laffer. The state of Kansas didn't follow the "Total Taxes = Total Spending" equation when cutting direct taxes.

Laffer's curve had nothing to do with spending. The Kansas 'experiment' was that allegedly if you cut taxes enough, you can offset those tax revenue losses with an increase in economic production which generates the lost tax revenue.

 

[Draconis]

So many things are made in other countries these days, which means that when taxes are cut, the extra money is largely spent on economic activity elsewhere. Or else it is pocketed.

 

[Loren Pechtel]

So many things are made in other countries these days, which means that when taxes are cut, the extra money is largely spent on economic activity elsewhere. Or else it is pocketed.

Which doesn't change the fact that the economic effects of tax cuts aren't nearly enough to make up for the lost revenue unless the tax rate was already very high.

 

[zorq]

So many things are made in other countries these days, which means that when taxes are cut, the extra money is largely spent on economic activity elsewhere. Or else it is pocketed.

Which doesn't change the fact that the economic effects of tax cuts aren't nearly enough to make up for the lost revenue unless the tax rate was already very high.

Exactly. Laffer and conservatives are so convinced that we are to the right of the equilibrium point on the Laffer curve, but do they ever stop to consider that we might already be to the left?

 

[Jimmy Higgins]

Which doesn't change the fact that the economic effects of tax cuts aren't nearly enough to make up for the lost revenue unless the tax rate was already very high.

Exactly. Laffer and conservatives are so convinced that we are to the right of the equilibrium point on the Laffer curve, but do they ever stop to consider that we might already be to the left?

Often, the plan is to starve the beast just enough to get away with more and more spending cuts. In Kansas, they starved it far too much, the spending cuts required to balance the budget would not have been tolerated by the generally conservative populace of the state.

 

[Jason Harvestdancer]

Here's what Kansas did: The cut out taxes ...

Let me stop you right there. I learned something very important from Jason's reply above. Yes, Kansas cut taxes, but they didn't cut Total Taxes. See what I did there? I capitalized the words, which is important. Kansas cut taxes, but they didn't cut Total Taxes, which is Totally Different. Had they cut Total Taxes as opposed to just taxes, the experiment would have Totally Worked.

It's not capitalization that makes the differences. It is pointing out that if you only cut direct taxes you shift some taxes onto indirect taxes.

See, I can run the exact same equation in all lower case letters and it remains the same.

total taxes = total spending

That's the first and fundamental point. If spending doesn't go down then total taxes doesn't go down. "But he cut taxes" you say. To which I reply thus:

total taxes = direct taxes + indirect taxes

So if total taxes remained constant and direct taxes go down, that means indirect taxes went up.

All without using a single capital letter in the equations.

 

[Jimmy Higgins]

Geesh, someone nudge Jason, he's skipping again.

I was looking at the state of of Kansas General fund and if someone else looks, you just might be able to tell when a Democrat was Governor.


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[Loren Pechtel]

Which doesn't change the fact that the economic effects of tax cuts aren't nearly enough to make up for the lost revenue unless the tax rate was already very high.

Exactly. Laffer and conservatives are so convinced that we are to the right of the equilibrium point on the Laffer curve, but do they ever stop to consider that we might already be to the left?

Yup, this is the problem with the Laffer curve. The curve is obviously basically true (there is a slight flaw, at 100% tax there still will be some tax collected because people will have schemes that hide some but not all of their income) but note the absence of marks other than at 0% and 100%. The right takes it on faith that we are on the right side of the peak, there is no evidence for this. If anything, we are probably on the left.

 

[Jason Harvestdancer]

Geesh, someone nudge Jason, he's skipping again.

Ford thought that I was playing some sort of trick when I capitalized the names of the variables in the equation. He probably also thinks that a gold fringe on a flag means we're operating under maritime law. So I had to point out to him that the capitalization actually doesn't matter one little bit by making everything lower case.

 

[Ford]

Geesh, someone nudge Jason, he's skipping again.

Ford thought that I was playing some sort of trick when I capitalized the names of the variables in the equation. He probably also thinks that a gold fringe on a flag means we're operating under maritime law. So I had to point out to him that the capitalization actually doesn't matter one little bit by making everything lower case.

Actually I was mocking you. Capitalization aside, the fact is that the tax cuts Kansas enacted were not the silver bullet promised by Brownback and conservolibertarians in general.
(And yes, I know the term conservolibertarian bugs you, which is why I used it).

Whatever you call it - voodoo economics, trickle down economics, "pro-growth policies" - the name or capitalization of terms doesn't matter. The shit doesn't work. Had Kansas enacted massive spending cuts that offset the drastic drop in tax revenues, it still would have failed, because handing businesses a tax cut doesn't magically lead to job creation. It just pads their bottom line.

I think it is important to remember that the repeal of Browback's tax cuts happened under the GOP controlled legislature, who were so convinced that it had failed they overrode the Governor's veto of their bill. A Republican legislature in a deeply red state just voted in a big fat tax increase. Why? Because for a change they actually accepted reality.

 

[Axulus]

Washington state economy is doing really well (#1 in GDP growth in the US in 2016). Does this prove that consumption taxes (sales taxes) instead of income taxes aids the economy? Income taxes are zero here.

Texas was also in the top five - zero income taxes as well.

 

[Jimmy Higgins]

Washington state economy is doing really well (#1 in GDP growth in the US in 2016). Does this prove that consumption taxes (sales taxes) instead of income taxes aids the economy? Income taxes are zero here.

Texas was also in the top five - zero income taxes as well.

Meanwhile the best schools are in the Northeast.

 

[Nice Squirrel]

Washington state economy is doing really well (#1 in GDP growth in the US in 2016). Does this prove that consumption taxes (sales taxes) instead of income taxes aids the economy? Income taxes are zero here.

Texas was also in the top five - zero income taxes as well.

You can have a shitty economy and top growth by percentage. It all depends on the metrics.

- - - Updated - - -

Meanwhile the best schools are in the Northeast.

I notice how you said "Northeast"... this would exclude Liberty University.

 

[Jimmy Higgins]

You can have a shitty economy and top growth by percentage. It all depends on the metrics.

- - - Updated - - -

Meanwhile the best schools are in the Northeast.

I notice how you said "Northeast"... this would exclude Liberty University.

It also excludes that Ranch Dressing Eating Universities in Minnesota!

 

[Jimmy Higgins]

Exactly. Laffer and conservatives are so convinced that we are to the right of the equilibrium point on the Laffer curve, but do they ever stop to consider that we might already be to the left?

Yup, this is the problem with the Laffer curve. The curve is obviously basically true...

In the sense of not really, as it does not include anything regarding spending and needs being met. If the Government taxed 100%, however, people had all of their needs met, then there would be plenty of tax collected. Although, with that being the case, it could be argued there is no currency at all.

The right takes it on faith that we are on the right side of the peak, there is no evidence for this.

Well there is also the starve the beast deal, where the Republicans know that this shit won't work at generating tax revenue, and when the revenue doesn't meet their "goals", they cut spending. It is how they cut spending.

 

[jonatha]

Exactly. Laffer and conservatives are so convinced that we are to the right of the equilibrium point on the Laffer curve, but do they ever stop to consider that we might already be to the left?

Yup, this is the problem with the Laffer curve. The curve is obviously basically true.

No, it's not.

 

[coloradoatheist]

Yup, this is the problem with the Laffer curve. The curve is obviously basically true.

No, it's not.

So if the government taxed at 100% tax rate people would turn over 100% of their income and all money would go to the government and none to the people?

I agree with Loren. It's silly at the state level to believe that a 1 or 2% drop in tax rates would be switching the curve. But that doesn't mean that all taxes are that case.