We should learn from Kansas experiment

April 4, 2017

It wasn't what politicians usually expect to hear.

On March 2, Gov. John Carney was discussing the state's $350 million budget shortfall at the Lewes Fire Department's Nassau station. (The predicted shortfall has since risen to nearly $386 million.)

After an overview, Carney took questions and comments from the standing-room-only crowd. That's when Joanne Cabry of Rehoboth spoke up.

"I want to go on record as saying I don't pay enough taxes," Cabry began. Some clapped, some groaned, some looked astonished. Among those displeased was Steve Hyle of Lewes, who wrote in the March 10 Cape Gazette that he and his wife were "chilled" to the bone by Cabry's comment. (Cabry talked about why she was willing to pay more taxes in a March 13 letter.) That sentiment, no doubt, is shared by many.

Consider Gov. Markell's 2014 proposal to raise the gas tax by 10 cents. Prices at the pump had fallen from nearly $4 per gallon to just over $2.

It was a case of solid reasoning and perfect timing. Delawareans, especially those in Sussex, were desperate for transportation improvements. Plus, Delaware hadn't raised the 23-cents-a-gallon tax since 1995, meaning inflation had effectively chopped the gas tax by 13 cents.

Talk about a painless increase. Talk about a political no-brainer.

Or it should have been. But politicians were too spooked to go along with any tax increase, citing potential harm to the state's economy.

Which raises the questions, are tax increases always harmful? Are tax cuts, even low taxes themselves, always good?

Here are a few examples of tax hikes and cuts to consider:

• In 1993, President Bill Clinton pushed through a tax increase to reduce the deficit. House Speaker Newt Gingrich said, "The tax increase will kill jobs and lead to a recession." Gingrich was wrong. The economy boomed.

• In 2001, President George W. Bush cut taxes by signing the Economic Growth and Tax Relief Reconciliation Act. The act did not live up to its name. Job growth remained anemic throughout Bush's term, far lower than Obama's. And not only were taxes cut, but government spending surged because of the wars in Iraq and Afghanistan. Meanwhile, consumers celebrated with a spending binge made possible by the housing bubble, which allowed homeowners to cash out the rapidly rising value of their homes. And we still had lousy job growth, topped off with a wrecked economy.

• The most striking example of taxes and their effect on the economy may be Kansas. Conservatives often cite states as "laboratories of democracy." They argue that governmental experiments should begin at the state level and, if successful, spread to other states and bubble upward to the federal government. It's not a bad argument, so let's look at Kansas.

In 2012, Gov. Sam Brownback embarked on what appeared to be a conservative dream-come-true. He signed a bill "eliminating state income taxes for small businesses and reducing the tax burden on hard-working Kansans." The tax cuts, he promised, would pump a "shot of adrenaline into the heart of the Kansas economy," reminiscent of that famous scene in "Pulp Fiction" where John Travolta jolts Uma Thurman back to life.

Unfortunately for Kansans, the state's economy hasn't bounced back the way Uma did. It remains on life support. From 2014 to 2015, the Kansas state gross product declined 1.1 percent. That compares to a positive 0.1 for the six-state region and 2 percent growth for the country as a whole (Oct. 1, 2016 Kansas City Star).

Meanwhile, the state budget is a shambles; funding for schools and roads has been cut and things have gotten so bad that Brownback finally took bold action: He began hiding reports depicting the true state of the Kansas economy. Now it appears that Brownback, with two years left in his term, may bail on his grand experiment and accept a Mickey Mouse job with the Trump administration. And the legislators left having to deal with the mess? They're raising taxes.

We should learn from this failed experiment. Actually, we should learn from our own failed experiment. Delaware boasts some of the lowest tax rates in the nation and has for decades. Where's the job growth, the wage growth, the roaring economy? Low tax rates aren't magic. If they were, we wouldn't be having this conversation. Meanwhile, 90 percent of the state's waterways are polluted, and flooding remains a constant concern, issues which Cabry mentioned.

We can pay now for clean water and flood abatement. Or we can pay later, in terms of a degraded environment and an economy to match.

Don Flood is a former newspaper editor residing in Lewes. He can be reached at flood

  • Accomplished writers appear in the Politics column every Tuesday on a rotating basis to explore the dynamic world of politics at the local, county, state, national and world levels.

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