One more Reason not to be like Kansas
A bond rating agency has downgraded its rating of Kansas’ creditworthiness, citing revenue reductions from tax cuts and slow economic growth, among other factors.
A few weeks ago on the Wisconsin Budget Project blog, we highlighted how massive tax cuts in Kansas have failed to boost that state’s economy, while harming schools and other services. (Don’t Be Kansas: Impact of Massive Tax Cuts on Kansas Offers a Warning to Wisconsin, 3/27/14.)
What has happened in Kansas should serve as a cautionary tale for tax-cut proponents in Wisconsin, rather than a model.
Now there is additional evidence that enormous tax cuts have not had the result lawmakers intended. Moody’s downgraded Kansas’ bond rating, noting the following areas of concern:
Kansas’ relatively sluggish recovery compared with its peers, the use of non-recurring measures to balance the budget, revenue reductions (resulting from tax cuts) which have not been fully offset by recurring spending cuts, and an underfunded retirement system for which the state is not making actuarially required contributions…The phasing in of increasing income tax cuts, along with rising pension costs, will continue to exert pressure on the budget.
States with lower credit ratings face higher costs when borrowing money for large building projects, such as roads.
There are many similarities between what has happened in Kansas and what has happened – and continues to happen – in Wisconsin. Like Kansas, Wisconsin has pushed through large tax cuts that helped the rich much more than most state residents. Both states recently raised taxes on low-income families working to climb into the middle class. And like in Kansas, tax cuts haven’t spurred job growth in Wisconsin (Tax Breaks Abound in Wisconsin, but Job Growth Remains Slow, 5/2/14).
There is no indication that a downgrade for Wisconsin is in the works, but the downgrade of Kansas’ creditworthiness should give pause to Wisconsin lawmakers. Tax cuts haven’t done much to create jobs, in either Kansas or Wisconsin, and have led to unintended negative consequences.
Rather than implementing new tax cuts, Wisconsin lawmakers should get invest in the basic building blocks of economic growth: good schools, safe communities, and a solid transportation network.
For more information, go to www.wisconsinbudgetproject.org.