Kansas Offers Cautionary Tale for Federal Tax-Cut Plan

Tax-cut advocate Arthur Laffer tells the Financial Times that tax cuts like President-elect Trump’s plan, which would overwhelmingly benefit the wealthiest Americans, would generate economic “nirvana,” with economic benefits that would “trickle down” to ordinary workers.  Laffer was a key architect of the tax cuts that Kansas enacted in 2012, which are similar to the Trump plan in delivering large tax cuts to high-income filers and creating substantial opportunities for the wealthiest to avoid taxes.  Kansas’ tax cuts are a stark warning about that approach. 

In fact, as my colleague explained in August, Laffer’s predictions that the Kansas tax cuts would spur an “immediate” state economic boom have proved strikingly inaccurate:

• Since the tax cuts took effect in January 2013, total employment in Kansas had risen only 2.8 percent, compared to 6.7 percent nationally; 
• The state’s economy had grown less than half as fast as the national economy; and
• Kansas’ share of newly opened business establishments in the United States had fallen slightly rather than risen.

With its large, regressive tax cuts for the wealthy, the Trump plan would give the nation a dose of Laffer’s prescription to Kansas.  The Kansas experience cautions us that there’s something wrong with the medicine.