Kansas and North Carolina cutting taxes to spur jobs and growth | Don Brunell

In Olympia these days, lawmakers are high centered in a second special session over the budget to operate the state for the next two years. The stalemate has come down to the choice of raising taxes or funding government within the current revenues.

In Olympia these days, lawmakers are high centered in a second special session over the budget to operate the state for the next two years. The stalemate has come down to the choice of raising taxes or funding government within the current revenues.

Gov. Jay Inslee and fellow Democrats call for a new 5 percent capital gains tax they estimate will generate another $550 million. In addition, Inslee has proposed a new billion dollar tax scheme on carbon emissions. On the other hand, Republicans believe the projected $3.2 billion (9.2 percent) increase in revenue collections already expected over the 2015-17 budget cycle will suffice.

At our state capitol, nobody is talking about reducing taxes.   In Kansas and North Carolina, however, tax cuts implemented a couple of years ago are creating jobs and increasing worker wages.

In 2013, new North Carolina Gov. Pat McCrory (R) felt compelled to turn around the state’s sluggish economy.  Lawmakers slashed the state’s top personal income tax rate to 5.75 percent from 7.75 percent, which had been the highest in the South. The corporate tax rate was cut from 6.9 percent to 5 percent and the estate tax was eliminated.

The result: nearly 200,000 jobs have been added and the unemployment rate has fallen from the 7.9 percent to 5.5 percent.  Most importantly, it has given people in rural areas where the jobless rate topped 20 percent a chance to go back to work.

In Kansas, lawmakers reduced the top rate on the personal income tax from 6.45 percent to 4.9 percent. They also eliminated the income tax for small business owners who file as individuals, a broad group that includes sole proprietors, limited liability partnerships and S-corporations.

Since then, hourly wages have grown by 3.5 percent compared with the national average of 1.9% and the unemployment rate has dropped to 4.2 percent.

In contrast, Washington’s statewide jobless rate in April was 5.5 percent, with 80 percent of Washington counties reporting unemployment rates above the national average.

Do tax cuts really make a difference?  One way to gauge that is to compare the economic performance of Kansas City, Kansas with Kansas City, Missouri, right across the state line.

Over the past two years, private-sector jobs on the Kansas side increased 5.6 percent compared with 2.2 percent job growth on the Missouri side.  In the same period, hourly wages grew $1.22 on the Kansas side compared with $0.61 on the Missouri side.

While critics complain that the Kansas tax cuts have blown a hole in the state budget—$344 million in the 2015 fiscal year and $600 million in the next—the North Carolina reforms, which included changing the state’s unemployment tax system, generated a $400 million revenue surplus.

According to the Heritage Foundation, North Carolina’s former budget director Art Pope says one difference between the two states is that, “we cut spending too. Kansas didn’t.”

Kansas is betting that more private sector jobs and tax revenues from economic growth will produce the same revenue surpluses.

Cutting taxes is politically risky.

Kansas Gov. Sam Brownback (R) was roundly criticized by liberals who tried to convince voters that higher taxes are a price that must be paid for progress, yet he beat back Democrat challenger Paul Davis in last November’s election.

In North Carolina, McCrory faced armies of protesters when he proposed cutting taxes and reducing unemployment benefits.   But the bottom line is reforms in both states are working.

As Brownback explains: “If your objective is to grow the economy, would you rather put more money into government, or leave it in the hands of small business?”

 

More in Business

Carbon fee hurts businesses and families | Don Brunell

A carbon tax would raise over $610 million in its first year and jump to $761 million by 2023, but the added cost from the initiative over 15 years is projected to be 57-cents a gallon.

Firehouse Pub: slight change of address but atmosphere remains the same

It was quite the project, renovating the pub’s new home.

Enumclaw’s QFC debuts home delivery service

The first order is free, but other orders will come with a charge.

Boeing’s venture into hypersonic jets | Don Brunell

The company’s come a long way since nearly crashing the company with its first attempt at supersonic flight.

Avoiding trouble while Tweeting | Don Brunell

Your social media can hurt you or help you when looking for a job.

Lampson beating odds for family-owned businesses | Don Brunell

According to The Family Firm Institute, only about 30 percent of family-owned businesses survive into the second generation and fewer than 12 percent are still viable into the third generation.

Much-needed dose of Yogi Berra’s wisdom | Don Brunell

We need less sarcasm and to alleviate the vilification of one another that we constantly witness in the news and on social media.

Trade wars hit state’s cherry growers hard | Don Brunell

Earlier this year, President Donald Trump imposed a 25 percent tariff on $34 billion of Chinese imports to punish China for its alleged predatory tactics toward American technology companies.

Columbia River treaty talks too vital to ignore | Don Brunell

The United States and China are currently renegotiating the Columbia River Treaty.

Bellevue company patent infringement win gives small investors hope | Don Brunell

Until recently, our courts have been little help to patent owners.

Podiatrist opens Enumclaw practice

Go see Dr. Bock at 853 Watson Street North, Suite 100.

American giving has surpassed $400 billion | Don Brunell

“Americans’ record-breaking charitable giving in 2017 demonstrates that even in divisive times our commitment to philanthropy is solid.”