When Kansas Governor Sam Brownback enacted his bold approach to tax reform, he gave a much-needed boost to small businesses throughout the state. Thanks to Brownback’s tax cuts, these businesses can make greater investments, hire more employees, and set themselves on a more stable course toward the future. Considering that 44 percent of working Kansans are employed by small businesses, the Brownback tax cuts positively impact thousands of families.
Unfortunately, no good deed goes unpunished, with outlets like the Kansas City Star questioning the wisdom and efficacy of the cuts. The Star’s editorial board published a column downplaying the positive impact the cuts have had on the state’s small businesses and expressing skepticism about Kansas’ ability to draw in business from states with higher tax burdens. In an excellent rebuttal to the Star’s editorial, the Kansas Policy Institute outlines the problematic nature of their claims. While successful growth is typically measured in the number of private-sector jobs created, the Star instead uses (but does not disclose this fact) nonfarm jobs – in other words, the total of government and private sector jobs.
Additionally, as the KPI paper rightly points out, the Star uses point-to-point comparisons to make its case, comparing Bureau of Labor Statistics numbers from January 2014 and January 2015. A more reasoned and accurate approach is to look at average annual employment numbers (which the BLS also publishes), in order to mitigate the impact of any single large spike or decline. Looking at these bigger-picture numbers, we see that Kansas nonfarm jobs grew by 2.4 percent between December 2012 and January 2015. In Missouri during the same timeframe, nonfarm jobs increased by 1.9 percent. This more stable, accurate comparison of average annual employment reveals Kansas to be growing faster than Missouri – whether you use nonfarm or private-sector employment figures.
Also, since Brownback’s tax reform, private-sector GDP has increased in Kansas. The Tax Foundation shows Kansas outperforming the 50-state average in 2013 (the numbers for 2014 aren’t yet available), as well as far outperforming the ten states with the highest state and local tax burden. In the fourteen years prior to tax reform, Kansas lagged behind.
Kansans should be celebrating their state’s strides. The growth of small businesses in Kansas is at an annual rate of 6 percent – higher than the national average and higher than the growth in any neighboring states, including Missouri. In the 2013 tax year, more than 8,600 first-time small-business filers invigorated the state’s economy with more than $486 million in new income.
As Governor Brownback himself stated this week: “Our goal, as a state, should be growing an economy that provides opportunity and jobs for all Kansans. A tax policy that puts more money in the hands of working Kansans and that rewards productivity is resulting in growth in Kansas, without question.”
Leaders in other states should be inspired by the small business and employment gains in Kansas as they examine their own state tax policies and determine which reform options will work best in their own home states.
