| Tax Reform Leads To More Jobs, Higher Wages
New Analysis Captures Real World Effects of Lower Taxes and Positive Impacts on KS
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Wichita - July 24, 2012 - Answers to many of the policy and political questions regarding the tax reform package that Gov. Sam Brownback signed into law in May are in a new analysis from Kansas Policy Institute. "Tax Reform Gears Kansas for Growth" shows that at least 33,000 new jobs will be created and Kansans will have at least $1.6 billion more in disposable income. The study also shows that a one-time spending adjustment of about 8.5% is all that is needed to have balanced budgets with healthy ending balances.
Dave Trabert, president of Kansas Policy Institute, offered, "Efficient government spending is the key to tax reform. Every state has schools, social service programs and other primary services. Some states have done a better job of providing those services at lower costs. Kansas can have lower taxes and high quality services by improving efficiency by just 8.5%. In dollar terms, the FY 2014 budget would be about the same as in FY 2011."
Data from the National Association of State Budget Officers shows that twenty-four states spent less per-resident than Kansas in FY 2010 - and that's when Kansas was spending nearly $900 million less than today.
The paper also shows that revenues will not decline as much as predicted in the Kansas Legislative Research Department's analysis. KLRD's analysis is "static" in that for every dollar of tax cuts will result in lower revenue. It does not take into consideration the actions of individuals with more money in their pocket. KPI partnered with the Beacon Hill Institute at Suffolk University to produce a "dynamic" analysis which makes clear that lower taxes equals more money to be spent in the private sector economy.
Practically speaking, this means that some of the money previously collected through income taxes will be spent by consumers and go to the different levels of government in the way of higher sales, and other tax collections. A dynamic analysis also accounts for additional income taxes that will be paid as a result of higher employment.
Finally, the study shows that local government will collect at least $323 million in higher sales and property taxes as a result of increased consumer activity.
Trabert concluded by saying, "General Fund spending increased by 82% between 1994 and 2011 while inflation and population only grew by 61%, which is further evidence that Kansas has room to operate more efficiently and still provide essential government services. Local government will enjoy even higher tax revenue, so tax reform provides no rational basis for officials to speculate about higher tax rates"
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Kansas Policy Institute is an independent think-tank that advocates for free market solutions and the protection of personal freedom for all Kansans. Our work centers on state and local economic policy with primary emphasis on education, fiscal policy and health care. We empower citizens, legislators and other government officials with objective research and creative ideas to promote a low-tax, pro-growth environment that preserves the ability of governments to provide high quality services. To speak with Kansas Policy Institute, please contact James Franko at (316) 634-0218.
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