In 2012, Kansas Governor Brownback pushed the Legislature to whack individual tax rates by 25%, to repeal the tax on sole proprietorships, and to increase the standard deduction. In 2013, the Legislature cut taxes again. Since passage in 2012, how has the Kansas economy responded to these dramatic tax cuts?
Post Tax-Cut Earnings: Since QIV, 2012, Kansas grew its personal income by 2.92%, which was higher than the U.S. gain of 2.85%, and was greater than the growth experienced by each state bordering Kansas, except Colorado. Additionally, in terms of average weekly earnings, Kansas experienced an increase of 4.82%, which was almost four times that of the U.S., more than four times that of Missouri, approximately seven times that of Nebraska, and nearly four times that of Oklahoma. Of Kansas' neighbors, only Colorado with 4.82% average weekly wage growth outperformed Kansas.
Post Tax-Cut Job Performance: Between the last quarter of 2012 and August 2014, the U.S. and each of Kansas' neighbors, except Nebraska, experienced higher job growth than Kansas. However, much of Kansas' lower job growth can be explained by the fact that during this period, Kansas reduced state and local government jobs by 1.4% while all of Kansas' neighbors and the combined 50 U.S. states increased state and local government employment. In terms of unemployment, Kansas' August 2014 joblessness rate was 4.9% compared to rates of 6.1% for the U.S., 5.1% for Colorado, 6.3% for Missouri, 3.6% for Nebraska, and 4.7% for Oklahoma.
Kansas job and income data since the tax cut show that, except for Colorado, the state economy has outperformed, by a wide margin, that of each of its neighbors and the U.S. To remain competitive, expect Kansas' neighbors to reduce state and local taxes in the years ahead.