Kansas Experiment

Kansas Experiment. This term refers to a major state-level fiscal policy initiative enacted in Kansas under Governor Sam Brownback, beginning in 2012. Centered on deep tax cuts, particularly for pass-through business income, it was promoted as a real-world test of supply-side economics and the Laffer curve theories advocated by economist Arthur Laffer. The experiment aimed to stimulate rapid economic growth but ultimately led to severe budget shortfalls, cuts to public services, and widespread political backlash, leading to its legislative reversal in 2017 by a bipartisan coalition.

Background and legislative history

The policy framework was championed by Republican Governor Sam Brownback, who took office in 2011 following a career in the United States Senate. He was heavily influenced by the economic theories of Arthur Laffer and sought to implement what he termed a "real live experiment" in supply-side economics. The core legislation, known as Senate Bill Substitute HB 2117, was passed by the Kansas Legislature in 2012 with strong support from the American Legislative Exchange Council (ALEC). Key provisions included the near-elimination of state income taxes for owners of LLCs, S corporations, and other pass-through entities, alongside reductions in individual income tax rates. This approach was distinct from the federal tax policies of the Reagan administration and contrasted with the fiscal strategies of neighboring states like Missouri and Colorado.

Economic and fiscal outcomes

The immediate result was a precipitous drop in state revenue, creating persistent and large budget shortfalls. Contrary to predictions by proponents like the Kansas Policy Institute, the promised "shot of adrenaline" to the economy did not materialize; job and GDP growth in Kansas lagged behind most neighboring states and the national average. The revenue collapse led to multiple rounds of budget cuts, affecting areas like public education, highway maintenance, and higher education. To balance the budget, the state drained its rainy day fund, delayed pension payments to the Kansas Public Employees Retirement System, and increased sales taxes on consumption, which disproportionately impacted lower-income residents.

Political and social impact

The experiment sparked significant political upheaval. Widespread public dissatisfaction was evident in the 2016 elections, where several conservative incumbents in the Kansas Senate and Kansas House of Representatives lost primary challenges to moderate Republicans. This shift was pivotal in creating a new bipartisan governing coalition in Topeka. High-profile figures, including former Republican Governor Bill Graves and the editorial board of the *Wichita Eagle*, became vocal critics. The political fallout damaged the standing of Sam Brownback, whose approval ratings plummeted, and influenced national debates within the GOP about tax policy.

Analysis and academic reception

The experiment was extensively studied and broadly criticized by economists and nonpartisan analysts. Researchers from institutions like the Center on Budget and Policy Priorities, the Tax Policy Center, and the Institute on Taxation and Economic Policy consistently found the policy failed to deliver growth while exacerbating inequality. The Kansas City Federal Reserve published analyses noting the underperformance. Prominent commentators, including Paul Krugman of *The New York Times*, frequently cited it as a case study in failed conservative economic theory. Support from groups like the Heritage Foundation and the Americans for Prosperity Foundation diminished as the negative outcomes became undeniable.

Subsequent policy developments

Facing a fiscal crisis and a transformed legislature, the bipartisan coalition voted in 2017 to override Governor Sam Brownback's veto and roll back most of the tax cuts via House Bill 2178. This reversal ended the core experiment. Many of the newly elected moderate Republicans, such as Senator Barbara Bollier, later switched to the Democratic Party. The episode served as a cautionary tale in other states, with legislators in Oklahoma and Wisconsin citing the experience when debating similar tax cut proposals. Following the experiment, Kansas has generally pursued more fiscally centrist policies under subsequent governors Jeff Colyer and Laura Kelly.

Category:Economic history of Kansas Category:2012 in American economics Category:Tax policy in the United States