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Wednesday, June 14, 2017

One more point about the KS legislature’s KO (Kansas Override) of supply-side tax cuts [feedly]

One more point about the KS legislature's KO (Kansas Override) of supply-side tax cuts
http://jaredbernsteinblog.com/one-more-point-about-the-ks-legislatures-ko-kansas-override-of-supply-side-tax-cuts/

've been citing the KO–the Kansas legislature's override of Gov. Brownback's veto, thus pulling the plug on the state's failed experiment with supply-side tax cuts–ever since I heard about it, as have many others. The story raises welcome hopes that moderate R's might be waking up to the fiscal reality that many constituents value public goods more than regressive tax cuts.

Not to be a downer, but I've been pessimistic that DC R's will learn from KS R's. That's partly because facts clearly can't kill trickle-down mythology. The party's donors want their tax cuts, and they'll continue to sell snake oil to get them, facts and KS be damned.

But there's another dynamic in play here which I haven't seen mentioned: states have to balance their budgets while the federal government does not. So, if they're willing to accept larger budget deficits, DC R's can pass all the tax cuts they want and not worry about the consequences.

But R's wouldn't go that route because they disdain deficits and debt, right?

You're kidding, right? Have you seen budget proposals from Ryan or Trump? Though they claim to be revenue or deficit neutral through magic asterisks referencing cuts and loophole closures to be named later, and/or phony, inflated growth rates, the reality is that they load their tax cuts on the debt.

"We just don't think tax cuts add to the debt" was how one high-ranking Republican put it to me once, which is equivalent to "we just don't think 5-3=2. We think it still equals 5."

To be clear, I've underscored that conservatives are pushing hard to cut anti-poverty programs to reduce the red-ink generated by their tax cut proposals. But my point here is that if they can't get those offsets, and I and my colleagues are working to ensure that outcome, they won't emulate the KS legislature and give up on the tax cuts.

They'll put them on the deficit, because they can. And that's an important difference between state and federal fiscal policy which folks should know about.

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