Kansas Rebuke of Deep Tax Cuts a Warning Sign for Other State Officials

A move by Kansas Republicans to overturn deep tax cuts due to budget pressures has sent a clear message to Washington and other state legislatures that they’ll need to trade carefully when planning reforms of their own.

The decision will not be lost on the Trump administration, which has so far provided scant detail on how it intends to fund plans that include slashing the corporate tax rate to 15%.

State lawmakers, too, may be wary of suffering the same credibility hit taken by Kansas Governor Sam Brownback, who introduced the tax cuts in 2012. This week, he unsuccessfully attempted to veto moves to undo his work, after fellow Republicans faced complaints from constituents frustrated over cutbacks to education and other state spending.

Eighteen of the state’s 31 Republican senators and 49 of the party’s 85 House members voted against the governor. Their bill restored a third tax bracket for high income earnings and killed off so-called “pass-through” exemptions for some small businesses.

“It’s wrong for growth, and I don’t think it’s going to be a positive for this state moving down the road.”

“I think it’s wrong for the long-term view of the state of Kansas,” Brownback said. “It’s wrong for growth, and I don’t think it’s going to be a positive for this state moving down the road.”

Like Brownback, Treasury Secretary Steven Mnuchin has suggested Trump’s cuts will pay for themselves by generating economic growth.

To be sure, Mnuchin also has indicated that some tax loopholes might have to go to provide funding support. The idea of a proposed “border-adjustment tax” on imports, meanwhile, isn’t quite dead in the water yet.

CEOs have put tax reform at the top of their government wish list, though Chief Executive’s latest 2017 Best & Worst State’s for Business indicates that doesn’t necessarily mean they’re in Brownback’s camp, either.

Kansas appeared near the middle of the national state rankings at 27th and its taxation score was only slightly better, at 23rd.

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Ross Kelly
Ross Kelly is a London-based business journalist. He has been a staff correspondent or editor at The Wall Street Journal, Yahoo Finance and the Australian Associated Press.

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