Kansas Gov. Sam Brownback and the legislature enacted massive tax cuts in 2012, eliminating state taxes on the profits from 191,000 small businesses, including those owned by highly compensated professionals. The top income tax rate was lowered from 6.45 percent to 4.9 percent. The lowest income tax bracket is 3 percent.
We are now seeing the result.
Moody’s Investor Services last week reduced Kansas’ bond rating, citing income tax cuts, pension obligations, the use of one-time revenue to cover operating expenses, and Kansas’ sluggish economic recovery compared to surrounding states. The service announced last week that the rating was cut from Aa1 to Aa2.
This will result in higher interest taxpayers must pay when the state needs to borrow money.
The decision was made the same day Kansas officials announced April revenue collections were $92 million less than previous forecasts.
According to the Associated Press, Oklahoma Treasurer Ken Miller is warning Oklahoma state policy makers that a reduction in Kansas’ bond rating should serve as a “wake-up call” that a potential downgrade could happen in Oklahoma, despite that state’s growing economy.
Miller released figures Monday that show gross receipts to the Oklahoma state treasury continued to improve in April. But he says the state’s pension debt, the use of non-recurring revenue for operational costs, and the reduction of taxes without offsetting cuts in state spending could ultimately lead to a reduction in Oklahoma’s bond rating.
Miller called Oklahoma more fiscally responsible than Kansas, but he said those issues sound familiar.
This information comes at a time when school funding, ordered by the court, will not result in much if any increased funding for area schools.
Kansas receive’s a large portion of its funding from state income tax, and this type to tax cut was not responsible.
This is powerful information that Kansans must consider at the ballot box this fall.