Grasping Reality on TypePad, by Brad DeLong

Josh Barro explains the train wreck produced by Governor Brownback's reliance on Arthur Laffer as his fiscal policy advisor:

Josh Barro: Kansas Tax Cut Leaves Brownback With Less Money: "Kansas has a problem...

...In April and May, the state planned to collect $651 million from personal income tax. But instead, it received only $369 million. In 2012, Kansas lawmakers passed a large and rather unusual income tax cut. It was expected to reduce state tax revenue by more than 10 percent, and Gov. Sam Brownback said it would create “tens of thousands of jobs.” In part, the tax cut worked in the typical way, by cutting tax rates and increasing the standard deduction. But Kansas also eliminated tax on various kinds of income, including income described commonly--and sometimes misleadingly--as “small-business income”--a Form 1099-MISC instead of a W-2....

Consider me. I draw a salary from The New York Times; if I lived in Kansas, I’d pay state income tax on it. I also earn income from other news outlets, including MSNBC, where I am not a payroll employee. That makes me a “small-business owner” in the eyes of the government, and if I lived in Kansas, my income from MSNBC would be tax-free. By creating this preference for some types of income over others, Kansas has run into at least five problems:

1. It’s sometimes possible to turn taxable salary income into untaxed “business” income....
2. A lot of the beneficiaries of the tax break won’t be small businesses. Many are sole proprietors like me, who are fundamentally engaged in labor, not entrepreneurship, and aren’t likely to hire anybody just because they receive a tax break. At the other end of the spectrum, there’s no size limit on “small businesses” as defined by Kansas and the Internal Revenue Service.... As of 2005, only 0.2 percent of business partnerships--which Kansas counts as small businesses--had earnings of more than $50 million, but they accounted for 57 percent of all partnership earnings....
3. It’s not clear that there’s anything special about small businesses for the purpose of job creation....
4. Some of the revenue loss doesn’t even benefit taxpayers.... >5. The state budget is suffering.

Of course, lawmakers in Kansas knew when they passed the tax cuts that this would happen; the question is whether they will lose even more revenue than they expected over the long run.... According to data collected by the Rockefeller Institute, of 17 states that produce public monthly income tax revenue projections, Kansas’ April error — off by 28 percent--was by far the largest. No other state missed by more than 16 percent, suggesting that a failure to anticipate falling capital gains tax revenue was not the only problem in Kansas...

And miracle visa, Brownback might actually lose:

Daniel Strauss: Poll: GOP Kansas Gov. Brownback Trails Democratic Opponent: "The poll found Davis beating Brownback...

...47 percent to 41 percent while Libertarian candidate Keen Umbehr got 5.... Brownback's troubles seem to be, at least partially, based on education policy. The poll found that 73 percent of supporters for Davis said education was their top issue. Davis has actually made education one of his campaign's primary policy topics and his campaign has highlighted endorsements from teachers organizations. He's also repeatedly noted that he is the son of two teachers. The new SurveyUSA poll was conducted among 2,200 Kansas adults between June 19 and June 23. For the general election question, the margin of error was plus or minus 3.1 percentage points.

Jonathan Katz surveys the climate change--ooops! Not supposed to say those words in Kansas, are we?

Jonathan Katz: Kansas voters grow tired of Republican revolution: "Once a long shot, Kansas Democrat Paul Davis’ campaign...

...to unseat this conservative state’s Republican governor, Sam Brownback, has become surprisingly serious.... Brownback... got his start in politics as state agriculture secretary. He went to the U.S. Congress in 1994.... Two years later, when Bob Dole ran for president, Brownback won his vacated Senate seat, thanks in no small part to a last-minute $400,000 ad blitz paid for by an organization linked to Wichita’s billionaire brothers Charles and David Koch. As a senator, Brownback became nationally known for his opposition to abortion, gay rights and gangsta rap. He also helped train the next generation of Washington conservatives. In the 1990s, future vice presidential candidate and GOP budget guru Rep. Paul Ryan served as Brownback’s legislative director. After a failed bid to secure the 2008 GOP presidential nomination, Brownback returned to Kansas in 2010 to win the governorship in a landslide, carrying 103 of the state’s 105 counties. In the race, he outspent his opponent by 406 percent. Many expected him to sail on to a second term and then resume his quest for the presidency. Yet Brownback trails Davis in recent statewide polls by as many as 10 points. In part that’s because Davis, the current minority leader in the Kansas House of Representatives, has reached across the aisle, securing the endorsements of more than 100 current and former Republican officials.

But the biggest thing going for the Democrat is what’s going against Brownback and the rest of Kansas: the condition of the state budget. For the past three years, the governor has carried out an aggressive plan to remake the state economy. Under a plan co-designed and -promoted by the architect of Ronald Reagan’s supply-side economic policy, Arthur Laffer, the Republican-controlled statehouse slashed the top income tax rate by more than a quarter, from 6.45 percent to 4.8 percent. It also created enormous tax loopholes for businesses. By some readings, an executive could avoid paying any tax on profits or salaries by converting a corporation to a limited-liability company, or LLC.

Brownback told Kansans in 2012 that over five years the new tax policy would create more than 22,000 jobs beyond normal growth and attract more residents. The governor described the effort on MSNBC’s Morning Joe as a “real, live experiment”; given Brownback’s national ambitions, many wondered if his real goal was expanding his laboratory to include the other 49 states.

Then the results started coming in.... Kansas job growth has lagged all its neighboring states’ except Nebraska’s, according to the U.S. Bureau of Labor Statistics. Its population has grown at half the national rate.

Rather, the most immediate effect of the tax cuts has been the more predictable one: less money for state services. Kansas collected $310 million less in revenue than planned during the April and May tax season. The state’s nonpartisan legislative research division estimated when the tax cuts were passed that the state would collect $4.5 billion less through 2018. To make up for some of the losses, the state government targeted the pocketbooks of low-income consumers, reducing a planned sales tax cut and eliminating tax rebates for items like food, child care, access for the disabled and alternative-fuel equipment.

And:

Jonathan Katz: A Kansas twister: Wind energy politics complicate governor’s race: "Increasingly, Kansans are finding that wind from the west...

...may be yet another golden resource of the state — able to generate huge amounts of electricity and make them money in the process. A growing awareness of that windfall is cutting across partisan lines, winning adherents to a green energy source in a state otherwise dominated by deep red oil-and-cattle conservatives.... The Wartas still make most of their money from wheat, soybeans and their herd of muscular black-and-brown beef cattle. But the extra money from the electricity generated on his land (about 3 percent of the cost per megawatt), is a welcome addition.... At full capacity it would be generate more wind energy than any state except Texas, according to the U.S. Energy Department’s National Renewable Energy Laboratory.... Yet... the state’s producers only generated... 0.3 percent of the potential.

That’s in part because a small but politically influential group of Kansans is in the way. One hundred fifteen miles south of Warta’s ranch stands the Wichita headquarters of one of the most powerful energy corporations in the country, Koch Industries.... The Koch-funded advocacy group Americans for Prosperity is leading the fight to repeal a federal tax credit for wind energy producers.... Opposition to the credit in Congress has been championed by Rep. Mike Pompeo, a Republican whose district includes Wichita and whose top campaign contributors are oil and gas in general and Koch Industries in particular.

Extending the wind [tax credit] is a key priority for the Obama administration and its efforts to prop up wind and other favored green energy technologies,

Pompeo and 53 other Republicans wrote in a letter to the GOP House leadership last month.

Growth in wind energy is not driven by market demand, but instead by a combination of state mandates and a federal tax credit that is now more valuable than the actual market price of the electricity these plants generate....

Americans for Prosperity and the Kansas Chamber of Commerce (another major recipient of Koch money) spent months trying to get the Republican-controlled state legislature to repeal a state renewable-energy standard that requires about 10 percent of electricity in the state to be purchased from renewable resources, including wind; the requirement will rise to 20 percent by 2020. But the legislature refused.... The exact reasons why the Koch-funded empire has been dead set against wind energy aren’t clear. In a 2012 op-ed in The Wall Street Journal, Charles Koch said that tax breaks for wind, solar and biofuels were distorting the U.S. energy market... alternative energy tax breaks are dwarfed by billions of dollars in annual subsidies to the oil industry.... Brownback has close ties to the anti-wind forces.... As for the governor, Warta said his advice would be clear: “He better be for it, because it’s good for Kansas.”

And:

Jonathan Katz: Kansas governor gets schooled over cuts to education budget: "You can still buy the T-shirt of the beloved Marquette Elementary School Wolverines...

...at the Capital Sundries store on Washington Street, the main strip in this Kansas prairie town. But the school — the last one in this town of 650 people — no longer exists. It shut down earlier this year. “We all saw this coming,” superintendent Glen Suppes told reporters on the day Marquette Elementary closed its doors in May. “If you watch what’s happening at the state level, budgets are going down. We can’t [just] cut little things that don’t affect kids.”...

What’s “happening at the state level,” as Suppes put it, is this: Three years ago, Kansas’ Republican Gov. Sam Brownback arrived in office promising to restore the economy by slashing income taxes to attract more investment, jobs and people to the state. Those cuts, initiated in 2012, left Kansas with hundreds of millions of dollars less in revenue to pay for services. And by far the most politically sensitive area affected by those shortfalls has been education.

Kansans have long prided themselves on a strong public school system, which educates some 95 percent of the state’s children. The rising anger over cuts — and threatened further cuts — in the education budget has turned what was expected to be an easy re-election for Brownback, leading to a likely presidential run, into one of the closest gubernatorial races in the country.... Mark Tallman, the associate executive director for the Kansas Association of School Boards, wrote in an August analysis that, when adjusted for inflation, total school funding “has essentially been flat,” while operating funds are down $290 million since 2011. Classroom spending has fallen 12 percent since 2009, to roughly $3,800 per pupil, according to the state Department of Education. State universities have been forced to raise tuition to make up for budget cuts. Earlier this year, the courts stepped in to force legislators to appropriate more money to the state’s school districts....

“Our schools simply are underfunded right now, and Gov. Brownback made the single largest cut to school funding in state history. People are seeing the larger class sizes, the fees that parents are having to pay. The test scores are going down,” Davis, who led the governor in three August polls, said in an interview later that day....

Topeka is very sensitive to the anger in places like Marquette that fear their schools might be next. Lawmakers just aren’t sure what to do. Fearful of a backlash, Republican lawmakers looking to cut education costs were advised last year to refer to consolidation proposals as “common-sense reorganization.” Brownback is in a similar position. “I oppose consolidation,” he told the Topeka crowd. “Lots of times for a town, if they lose their school, you just as well close the town up too. It’s just not going to work.” The line drew applause. Reporters chased the governor afterward, asking for his specific plan for avoiding additional school closures. He dodged the question and climbed into his waiting car. “It’s not really a policy decision,” his spokesman explained as the governor drove away.