POLITICO Pro Brownback reverses course, proposes new taxes

Kansas Gov. Sam Brownback, whose massive tax cuts became a cause célèbre for conservatives but threw his state’s budget into disarray, announced Friday that he would pursue tax increases.

In a stark turnaround, the Republican called for higher taxes on cigarettes and liquor as part of his annual budget while proposing to make future tax cuts contingent on revenue projections.


Brownback’s cuts to a number of state taxes in 2012 failed to boost the economy like he had hoped, triggering a backlash when the huge budget shortfall that resulted forced major decreases in government services. His state’s credit rating was lowered, and Brownback nearly lost his job in the November elections.

Critics of the tax cuts enjoyed a told-you-so moment Friday, calling Brownback’s reversal inevitable.

“We’ve seen this exploding budget gap, and this year, after three years of this experience, the recognition is they have to put a halt on these tax cuts,” said Meg Wiehe, state policy director at the liberal-leaning Institute on Taxation and Economic Policy.

Brownback, a former senator whose name is sometimes bandied about for a possible presidential run, acknowledged the state’s fragile fiscal situation.

“My budget proposal recognizes that the current budget trajectory is unsustainable and that difficult solutions are required by state law as well as by fiscal prudence,” Brownback said in releasing his two-year budget.

But he said this week that he would stick with his plans to phase out the state’s income tax. “We will continue our march to zero income taxes,” the governor said Thursday in his State of the State address. “States with no income tax consistently grow faster than those with high income taxes.”

Critics have been howling for the past year, after the tax cuts did not deliver the economic growth promised. The shortfall fueled a debate over some conservative claims that tax cuts can pay for themselves.

The latest budget plan includes a major hike in taxes on cigarettes from 79 cents per pack to $2.29 per pack and a jump in a tax on liquor from 8 percent to 12 percent.

The moves may reverberate in Washington, where lawmakers are battling over congressional Republicans’ decision to implement so-called dynamic scoring. The controversial budgeting methodology attempts to take into account the economic effects of cutting taxes.

Grover Norquist, the anti-tax guru influential with conservative lawmakers, said Brownback’s new revenue proposal doesn’t roll back what they believe to be the most important part of what he did several years ago: income tax cuts.

“There has been no compromise on the commitment to phase out the income tax. The Kansas income tax did not receive a pardon from the governor, just a delay in the date of execution,” he said in a statement to POLITICO.

Kansas revenue analysts reported in November that the state would require $278 million in cuts by this June to balance the budget. They said a state reserve fund of about $379 million would be emptied, and lawmakers should cut an additional $435 million to avoid a deficit this year.

By most measures, Brownback’s tax cuts were historic.

He and the GOP legislature slashed personal income tax rates by 25 percent, with the biggest proportional cuts going to the wealthy. They also nixed all taxes for businesses organized as so-called pass-through entities — which can encompass mom-and-pop stores but also big law firms and other businesses that chose to organize that way.

Then came shortfalls, a credit downgrade from Moody’s and a revolt among moderate Kansas Republicans that nearly cost him his job in an unexpectedly tight race last fall.

The 2012 changes decreased tax rates for the highest earners from 6.45 percent to 4.9 percent, with the goal of dropping them to 3.9 percent in 2018. Brownback is now proposing to keep the 2015 rates at 4.6 percent and 2.7 percent, depending on income level, and to make further cuts only if revenues exceed the prior year by 103 percent.

His budget would boost general tax revenues from $5.8 billion in fiscal 2015 to $5.97 billion in 2016 and $6.11 billion in 2017. Consumption taxes would rise from zero in 2015 to $108 million and $104 million in fiscal years 2016 and 2017, respectively.

Brian Faler and Kelsey Snell contributed to this report.