In Kansas, phony tax cut debate

Some who oppose cutting income tax rates in Kansas are using slight of hand to make the case that Kansas can’t afford to cut taxes.

An example comes from the Kansas Economic Progress Council. Last week this group said that the tax cut bill passed by the House of Representatives would create a budget gap of $2,475,100,000 by fiscal year 2018. KEPC then compared that to what the state general fund might be at that time — perhaps around $6,500,000,000 — and marveled at how large the deficit would be to one year’s general fund spending.

This analysis was then picked up by groups like Kansas National Education Association (KNEA, the teachers union) and perhaps a few gullible newspaper editorial writers, and people in Kansas become concerned.

Projections surrounding the tax plan have been shifting. But the problem with the KEPC story, and where the slight of hand comes in, is that the deficit figure cited is the cumulative deficit over a period of four (or maybe five) years. But the general fund spending this cumulative number is compared to is for a single year.

There’s no valid basis for making this comparison. In the vernacular of the teachers union, it’s comparing apples to oranges.

It is simply a scare tactic used by special interest groups that benefit from government spending. It’s not truthful.

Where’s the multiplier?

KEPC also formulated an illustration as to how many jobs the state would need to create to overcome this purported budget gap. This might be a reasonable thing to do, as the stated purpose of the tax reduction plan is to create an environment in Kansas where job creation accelerates.

In its analysis, KEPC didn’t make use of the multiplier. This is a standard argument made by those who like KEPC want a government spending program started or expanded, or perhaps a sales tax increase. Each job created by the government spending, it is said, spawns spending that creates other jobs.

So why didn’t KEPC use the multiplier in this analysis? Is this a technique used only when it produces the results that special interest spending groups like KEPC desire?

On top of that, KEPC makes the same time series mistake as before, where the accumulated deficit over a period of years is treated as though it needs to be solved in one year.