By J. Mac Holladay, President, CEO, and Founder
Late last week, the Kansas Legislature overrode the Governor’s veto to repeal the radical tax plan passed in 2013. The program was supposed to usher in a flood of new jobs. The promised job growth never came. In fact, Kansas gross domestic product grew only .2 percent last year compared to 1.6 percent nationally. Several surrounding states with stable tax systems have flown by Kansas both in job creation and increased investment.
What did come to the state was a huge deficit in the state budget and drastic cuts to education at all levels. During this failed experiment, state school spending dropped from $4,400 per pupil to $3,800 with the poorest districts suffering the most.
The state had $700 million less revenue in 2014 than the year before, and this March the Kansas Supreme Court ruled that the funding for public education is “unconstitutionally low” and must be changed.
As Republican State Senator Dinah Skyes said, “we had to take a vote to say no and say, this is not the right direction.” While every state seeks to be competitive on costs, the Kansas experiment went to the extreme in letting thousands of small businesses pay nothing at all and radically reduce personal income taxes.
Earlier this year, one University President in Kansas asked me, how can I plan anything in this atmosphere? A key component of good tax policy is certainty. Both public and private leaders need to know what is going to happen related to stability and revenue flow. Companies looking to expand or locate want to know that their employees will have excellent educational opportunities for them and their children.
Beyond talent, quality of place is the number one factor in healthy local economies. Our firm has been working in several cities in Kansas recently, all are dedicated to making their place better. In recent years, they have been unable to know what exactly was coming or to get any help from the state. Now, maybe that can change. The Legislature has approved a $1.2 billion revenue increase over the next two years.
Kansas is another clear example, we cannot cut our way to prosperity.