A recent McClatchy Newspaper editorial (“In the Holy Kansan Empire, only taxes matter”) on Governor Brownback’s goal of eliminating the individual income tax perfectly highlighted the greatest impediment to economic recovery in Kansas. Instead of thoughtfully and civilly examining the proposal, the author used superficial data and mockery to reject it.

The first step of problem resolution is acknowledging its magnitude, and Kansas is facing an employment problem of epic proportions.  In the last recession, it took 32 months for private sector employment to hit bottom; we lost 46,200 jobs and it took almost 6 years to return to the previous peak. This time, we lost 90,400 jobs over 34 months and recovery will be much slower unless we take dramatic action. 

We’re already falling behind. Kansas is the only state whose average annual private sector employment is below its 2010 average. Part of the reason is that, unlike most states, Kansas chose to continue raising taxes last year. Kansas Legislative Research says state and local taxes grew at nearly twice the rate of inflation between 2000 and 2010, with the full impact of the sales tax increase not yet realized. 

Jobs and taxpayers have been migrating from high-burden states to low-burden states for some time. Between 1998 and 2010, private sector jobs in the ten states with the highest state and local tax burden increased by 1.0%, whereas the ten lowest burden states grew by 8.8%. At the same time, Kansas lost 1.2%.  Not surprisingly, the nine states with no personal income tax did even better; they added 1.7 million jobs while the rest of the country lost 300,000.  We must reduce our tax burden to create jobs and economic growth, and gradually eliminating the state income tax will have the greatest impact.

But that would not cause crippling reductions in essential services. Letting taxpayers keep more of their income will increase sales tax receipts, as much more money will be spent on taxable goods. That’s exactly what Oklahoma experienced when they reduced their income tax rate; Gov. Fallon is working to eliminate their income tax, and Missouri is considering the same. Imagine the impact if one or two of our neighbors did so while Kansas is still keeping taxes high.

Eliminating some sales tax exemptions would also partially offset income tax revenue and there is tremendous opportunity to reduce spending by making government operate more efficiently.

Questions about the transition are understandable but it’s pretty clear that not having an income tax hasn’t prevented states from funding services. In fact, General Fund spending in the nine no-income-tax states increased 54% between 2000 and 2008 while other states rose 46%. Per-pupil spending increases on education between 1998 and 2008 ranged from 50% to 123%. Not having an income tax didn’t prevent those states from spending; if anything, their economic growth made it easier.

Eliminating the income tax is about job creation and economic growth. Continuing our tax-and-spend ways of the past will only make it easier for other states to pick off more Kansas jobs and make a challenging situation far worse.

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