Economist warns Tax Council of fiscal challenges

A University of Kansas economist consulting with Gov. Laura Kelly’s Tax Reform Council said Wednesday Kansas faces major economic headwinds as the council seeks to improve the state’s tax structure. 

Donna K. Ginther, Professor of Economics and Interim Director, Institute for Policy & Social Research at KU, said over the past decade, Kansas payroll employment grew at only half the rate of the United States as a whole, and the Kansas labor force (those working and those looking for work) has actually shrunk, unlike other states in the 10th Federal Reserve Bank district (Kansas, Colorado, Missouri, Oklahoma, Nebraska, New Mexico and Wyoming). 

Although Kansas is experiencing higher natural population increase (difference between birth rates and death rates) than other Plains states, it is experiencing more out-migration. Population loss could further increase due to federal crackdowns on immigration. Kansas has had faster immigrant growth than the U.S. since 1970, and an estimated 2.6 percent of the Kansas population are undocumented immigrants. 

As a result, Kansas may have less of a challenge in creating jobs than finding people to fill current jobs. 

Attracting or retaining both employees and employers was a key justification for the income tax cuts supported by Gov. Sam Brownback (which were largely reversed in 2017) and for continuing calls for tax cuts. However, Dr. Ginther told the council that general academic research and specific studies of the Kansas income tax experiment have not found tax cuts clearly boost economic activity. Kansas was among the states with the lowest income growth while the tax cuts were in effect and has continued to lag the U.S. average. 

However, Dr, Ginther said research shows the tax cuts reduced state revenue and had a negative impact on public services. 

Other economic challenges facing the state include federal trade policy, which impacts Kansas agriculture and manufacturing exports; and growing fears of a national recession. 

Dr. Ginther suggested the council needs to identify the revenue needed to operate services at the desired level, determine how to collect revenue with the least distortionary impact on the economy, address equity in tax policy and use expenditures for public priorities. 

The council will next meet Oct. 15-16, then again in November and December to develop interim recommendations to the 2020 Legislative session. Here is a link to Tuesday’s meeting report, and a link to information about the council. 

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