Kansas job rank improves after tax reform

Dave TrabertTax & Spending

The first three years after reducing income taxes saw the Kansas job rank improve nicely according to data from the Bureau of Economic AnalysisOver the fourteen years leading up to 2012, private sector jobs grew by 6.3 percent and that growth rate ranked #41 among the states.  But in the three years since income taxes were reduced Kansas’ growth of 4.8 percent was ranked #31 among the states after adding 74,289 more jobs over the period.

As explained in “A Thousand Flowers Blooming – Understanding Job Growth and the Kansas Tax Reforms,” jobs data from BEA is more comprehensive than Bureau of Labor Statistics data because BLS excludes proprietors and farm workers.  The downside to BEA is that it often lags by as much as year whereas BLS publishes monthly.

The Kansas job rank also improved relative to its economic peers.  The authors of “A Thousand Flowers Blooming” measured the similarity of states by calculating correlation coefficients of the private sector workforce by sector for each of the 50 states.  States may share geographic boundaries, but much like nearby school districts’ can have dramatic demographic variances, so can state economies.

Prior to tax reform, four of Kansas’ economic peers had better growth but only three states did better since 2012 and one of them – Michigan – was beginning to rebound from job losses, whcih affects their percentage increase .

Preliminary data December 2016 data from the Kansas Department of Labor (which has the same data as BLS) and historic data from BLS shows average annual private sector jobs declined by 2,400 last year.  Most of that job decline was in rural areas (the Kansas City, Wichita and Lawrence metro areas had job gains), and much of that decline is attributable to weakness in agriculture and the oil & gas industry.  A recent sales tax analysis by the Kansas Department of Revenue shows sales tax receipts declining in areas that are especially dependent upon those segments of the economy.

However, proprietors aren’t included in that BLS data and they grew faster than other private sector jobs over the last three years, averaging 7,994 more per year.  It’s possible, therefore, that Kansas could have net positive job growth for 2016 when the BEA data is published.

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