In Response to Lee Chatfield’s Press Release
Michigan House Committee Approves Chatfield Income Tax Rollback
This article is completely misleading and employs mendacious language to deceive readers, tax payers and constituents. You use tired cliches of “helping working people” and “giving them back their hard earned money” without acknowledging just how much that translates to in real terms. You state: “When Michigan families have more of their own income to spend or save, the entire state economy benefits. This simply is the right thing to do and the right time to do it.” Let’s be honest here Mr. Chatfield. What the vast majority of Michganders will receive is a pittance and will do virtually nothing to improve the economy. Call it what it is, a huge giveaway to the top 5%:
More importantly, we know what such devastating reductions in income tax revenues results in, as has been undeniably evidenced by the state of Kansas over the past 4–5 years.
In July 2012, two months after GOP Kansas Gov. Sam Brownback signed a substantial state income-tax cut into law, he issued a forecast: “Our new pro-growth tax policy will be like a shot of adrenaline into the heart of the Kansas economy.”
The economic jolt that ensued was perhaps not what Brownback envisioned.
While Kansas took a different tack, ending the state’s income tax is also the goal of GOP lawmakers in recently announced measures in Michigan’s House and Senate.
From the end of 2012 to early 2016, Kansas’ GDP grew at less than half the national rate. Cuts in state revenue forced K-12 schools to close early and led to funding reductions for universities. To balance the budget, Brownback siphoned hundreds of millions of dollars from state highway funds. Moody’s twice downgraded the state’s bond rating. As of November, Kansas was still laboring to close a $345 million budget hole.
The 2012 cut was to be, according to those who advised Brownback, the first step toward eliminating that state’s income tax. (In bid to eliminate Michigan income tax, fears of another Kansas)
The economic and budgetary conditions in Kansas have been devastating. It has become so untenable that the State’s Republican legislature is in full revolt, as they seek ways to keep the state afloat.
Kansas’ Republican-led Legislature voted Friday to roll back a deep tax cut championed by Republican Gov. Sam Brownback, conceding it helped put the state in dire financial straits and setting up a possible showdown with him. […]
The state faces projected budget shortfalls totaling nearly $1.1 billion through June 2019. Even with a big tax increase, lawmakers still would have to approve some stop-gap measures such as internal government borrowing to pay bills through June, until new revenue started flowing in.
Brownback and his allies continue to argue that the personal income tax cuts he championed in 2012 and 2013 are creating economic growth and the state’s problems were largely caused by slumps in agriculture and oil production. Voters rendered a different verdict last year, ousting two-dozen Brownback allies from the Legislature and giving Democrats and GOP moderates more power.
Legislators would be forced to start over on a new tax plan if Brownback vetoed the bill and they couldn’t override him, creating the possibility of a drawn out dispute.
Kansas is facing its third major tax increase to fill budget gaps in the five years since the first Brownback-inspired income taxes were enacted. In 2015, Republican lawmakers boosted sales and cigarette taxes in a package that critics labeled the largest tax increase in state history. The bill approved Friday calls for an even bigger tax hike to cover larger budget shortfalls. (Kansas lawmakers vote to roll back governor’s deep tax cut)
Here are some of the destructive consequences of the Kansas “experiment”:
[T]he tax cut failed to boost the Kansas economy:
•Since it took effect in January 2013, total employment in Kansas has risen only 2.6 percent, compared to 6.5 percent nationally. Private sector employment in Kansas has risen 3.5 percent, compared to 7.6 percent nationally.
•The state’s economy has grown less than half as fast as the national economy; Kansas’ gross domestic product (GDP) grew 4.8 percent from the end of 2012 through the first quarter of 2016, while national GDP rose 11.9 percent.
•Kansas’ share of newly opened business establishments in the United States has actually declined slightly rather than increased.[11]
Moreover, the Kansas tax cut package has had a deleterious impact on the state’s financial stability and the provision of critical services. For example:
•Personal income tax revenues in the fiscal year ending June 30, 2016 (fiscal year 2016) were almost $700 million lower than those received in fiscal year 2013,[12] when the tax cut first took effect, even though the economy nationally is stronger in 2016 than it was in 2013. Receipts dropped immediately by slightly more than $700 million (24 percent), and the meager economic growth that occurred in Kansas from 2014 to 2016 boosted collections by only $30 million, or less than 2 percent.[13]
•Total General Fund revenues in 2016 were $570 million below 2013 levels, despite significant sales and cigarette tax increases enacted to partially offset the income tax losses.[14] The General Fund’s ending balance fell from $709 million in 2013 to $40 million in 2016 (just 0.7 percent of General Fund spending).[15] That’s important because Kansas’ General Fund balance is its “rainy day fund.”[16] Should a recession hit and tax revenues shrink as household incomes and retail sales fall, the state will need to cut programs or enact tax increases almost immediately because it will have very little savings to tap.
•The General Fund’s depletion occurred even though the state transferred to the Fund substantial tax revenues that were collected to finance road maintenance and construction.[17] The resulting reduction in infrastructure funding has forced the state to postpone numerous highway projects indefinitely.[18]
•Because the tax cuts leave less state revenue with which to repay people who lend the state money by buying its bonds, Kansas’ bond rating has been downgraded twice — in 2014, and most recently on July 26, 2016.[19] Lower bond ratings mean that the state will likely have to pay a higher interest rate on future borrowings, raising the cost of infrastructure projects such as school construction and road building. (Kansas’ Tax Cut Experience Refutes Economic Growth Predictions of Trump Tax Advisors)
Those who are blindly supporting HB 4001 and unquestioningly trusting the intentions and/or outcomes of Representative Chatfield’s bill without taking the time to research and understand how this will effect their own self-interest and the best interests of our great state will be guilty of negligence. It is the duty and obligation of all citizens to be informed, knowledgeable and engaged in the processes that directly effect their lives and those of their fellow Michiganders.
