Tax Reform Advocates Push for Lower State Income Taxes

Laffer, Brownback urge lowering tax burdens at the state level
Kansas Gov. Sam Brownback / AP

Kansas Gov. Sam Brownback / AP

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The governor of Kansas and tax reform advocates argued in favor of lowering tax burdens to stimulate state economies during a panel discussion at the Heritage Foundation on Thursday.

Gov. Sam Brownback (R.) opened the event extolling the economic effects of Kansas’ 2012 tax cuts.

In 2013, the top individual tax rate dropped from 6.45 percent to 4.8 percent in Kansas. Brownback anticipates that rate will fall to 3.9 percent by 2018 following the recent passage of another tax reform bill.

Additionally, income taxes for limited liability companies and small domestic corporations were eliminated.

“By giving these companies more money to reinvest in their businesses, we are enabling them to hire more people and invest in needed equipment,” Brownback wrote in a Wall Street Journal op-ed on Wednesday.

Brownback attributed Kansas’ consistent job creation and one of the country’s lowest unemployment rates—4.8 percent—to the tax cuts.

The economic policy initiatives in Kansas are similar to those laid out in An Inquiry into the Nature and Causes of the Wealth of States, a book coauthored by economist Arthur B. Laffer, financial guru Rex Sinquefield, and Travis Brown, CEO of lobbying firm Pelopidas, LLC.

Laffer and his coauthors examined IRS data for the 11 states that have implemented an income tax in the last 53 years. They then compared the three years prior to the implementation of the tax to the three most recent years for which comparable data is available. In each case the states’ economies worsened.

“Every single one of those 11 states, not one exception, declined as a share in the U.S. in each and every one of those metrics,” Laffer said.

The authors acknowledged their book might be a bit dry, but that the economic data and analysis could be used as a tool to encourage states to move toward tax reforms.

“What we try to do in this book in nail down every damn corner of this argument,” Laffer said addressing the case against tax reform.