CONTACT US

For any general inquiries, please fill in the following contact form:

Our websites never use cookies or other technologies such as pixel tags and web beacons. We only retain personal information when the contact section of our websites is filled. To proceed and get in touch with us through this format please read our Terms & Conditions, updated to be in line with the provisions of the GDPR, and tick this box to consent in us retaining the above information for contacting purposes only.

SUBMIT

Kansas's ravaged economy a cautionary tale as Trump plans huge tax cuts for rich

Kansas's ravaged economy a cautionary tale as Trump plans huge tax cuts for rich

By  in Topeka, Kansas

Kansas slashed taxes at the top to try to spur growth – but the plan crippled the state’s finances and proved disastrous for its Republican governor

Is Donald Trump about to turn America into Kansas? It’s a question some worried people who live in the state are asking as the Republican party pushes through the biggest tax overhaul in a generation – an overhaul that, they claim, bears an uncanny resemblance to a tax plan that left their midwestern home in disarray.

After a failed economic experiment meant to boost economic growth blew a hole in the Kansas budget as big as a prairie sky (a $350m deficit in the current fiscal year and nearly $600m in the next) state jobs and services have been slashed.

Prison guards are sharing stab vests at the El Dorado maximum security prison in southern Kansas. At the end of a shift, the sweat-soaked vests, worn all day in a facility without air conditioning, are passed to the next person by guards, many of whom are coming off 12- or 16-hour shifts.

Jail cells designed to hold one inmate are housing three or four at Ellsworth correctional facility. Riots have broken out at other prisons. The family of one guard who recently killed himself told union reps stress and over-work were to blame.

Next year, the state faces a school shutdown after the supreme court found its educational spending was unconstitutionally low. Some of those schools have already had to shorten the school year in order to save cash.

To make ends meet, money that was earmarked for roads has been diverted to the general fund. A state that used to maintain 1,200 miles of road a year is now repairing 200 miles a year. Even in the capital, Topeka, potholes are everywhere.

The crisis follows the 2012 passage of a tax plan by Kansas governor Sam Brownback that he dubbed “the march to zero”.

Individual state income tax rates dropped from 6.4% to 4.9% – with the intention of getting rid of them altogether eventually. Taxes were eliminated on so-called pass through entities – businesses where taxes are collected at the rate of the business owner and not at the corporate rate. The plan would provide a “shot of adrenaline” to the Kansas economy, Brownback claimed.

Instead, the state’s revenues collapsed. Rich people who had been paying high taxes became “pass-through entities”. The state’s coffers emptied and the promised economic miracle failed to materialize.

Lisa Ochs, president of the American Federation of Teachers-Kansas, said Brownback’s plan is a scale model of Trump’s plans. He, too, intends to cut taxes for businesses and give big breaks to the rich in a plan he says will provide “rocket fuel” for the American economy.

“There never was a shot of adrenaline. If anything, that shot put the state on life support,” she said. “It’s the same thing that Trump is saying: there’s going to be tremendous job growth. Well, that didn’t happen either. It’s going to take an entire generation to undo this damage.”

Ochs said: “I just hope the country can listen to us. Don’t do what we did.”

Job growth in the state lags behind neighboring Missouri. The cuts to pass-through businesses gave some small businesses a small tax break – but didn’t spark the promised hiring boom.

The backlash has become so fierce that state employers are taking notice. Staff at the woefully understaffed Larned State hospital were recently warned not to speak to the media or their own legislators. 

Hospital executives have since attempted to “clarify” the memo and dropped the directive – arguing it was never meant to silence workers. Workers, however, say there is a clear intent to stop them for speaking out.

One local hospital worker said: “There is a climate of fear. There are only three major employers where I live: the state, Walmart and Lakemary Center [a facility for children with intellectual/developmental disabilities]. It’s hard to get a job here.” The employee gave their name but the Guardian decided to withhold it for fear of jeopardizing the person’s job.

Sarah LaFrenz Falk, president of the Kansas Organization of State Employees ,who recently spoke to Congress about her fears about the Republican tax plan, said she sees an agenda in the Brownback plan – one that is mirrored in Trump’s plan: give huge tax breaks to super-rich donors [the rightwing, union-bashing Koch brothers are Kansas’s richest residents], then hand them a second win by cutting services, waiting for those services to buckle under the strain and then argue the private sector can do it better.

“They did what their donors wanted,” LaFrenz Falk said. Seeing the same plan enacted on a national scale is “very frightening,” she said. “History is littered with examples of cultures that allowed the wealthy to take over and forgot about the rest. What happens next? It doesn’t end well. How does that look in a country with no gun control?”

Kansas has already had one horrific example of private enterprise failure. In October lawmakers were “flabbergasted” to learn that the companies that now run Kansan foster homes had “lost” more than 70 children. Revelations about the unaccounted children came after it was revealed children had been left to sleep in local contractors’ offices because there were no places for them.

The state is currently looking to privatise its largest prison, at Lansing, near Kansas City. CoreCivic, the company overseeing construction of the new prison, is subject to lawsuits in six states and was accused by state officials of grossly under-staffing facilities in Tennessee.

One prison guard who spoke to the Guardian said the prison system was in the worst state they had witnessed in a 30-year career. After the state struggled to hire guards, the minimum age for hiring was dropped from 21 to 18. Few of the guard’s colleagues at a local women’s prison are now over the age of 21. “They are looking after women who are old enough to be their mothers or grandmothers,” the guard said. “During the recession we had cutbacks, but it was never as bad as it is now,” he said.

The details of Trump’s tax plan are still being worked out, but it looks certain to pass, and the fixed positions are big corporate tax breaks and a massive reduction for pass-through entities.

According to the non-partisan Joint Committee on Taxation, the benefits clearly skew to the rich. And by 2027, when many of its short-term tax breaks will expired, every income group below $75,000 would face tax increases, on average. Corporate tax cuts and benefits to the rich, including the abolition of inheritance tax, would remain.

The bill looks set to add $1tn to the national debt. Republicans are already discussing paying for the plan by cutting social security and gutting Medicare and Medicaid, the two federally funded health insurance schemes.

But, worryingly for Trump, Brownback’s tax plan proved not just disastrous for the state but also for Brownback and his supporters.

Brad Pendergrast runs Kansas Speaks, a state-wide poll run out of Fort Hays University. Even in 2010, when Kansas’s tax plan was still just a twinkle in Brownback’s glassy eyes, he didn’t have a popular mandate, he said. “There was some support for decreasing income tax, but he didn’t have a mandate,” said Pendergrast. “More Kansans supported decreasing property taxes and sales taxes.”

Now the majority of people in Kansas – of whatever political persuasion – think taxes on top earners should be increased or at least stay the same, a view that has strengthened over time. Some 45% wanted income taxes of top earners to rise in 2010, by the time of the latest poll that had risen to 60%, this in a state where all but two counties voted for Trump. The majority think taxes on corporations should be increased or stay the same.

The longer the tax cuts were in place, the more informed the electorate became, said Pendergrast, and the more they decided it was not working. “Republicans in general don’t want to pay taxes,” said Pendergrast. “When a state can’t meet its obligations, people realize that there are things you have to do and things you can’t,” he said.

Trump’s tax plan too is polling badly even before it is finalised. Nearly half (49%) of people aware of the measure said they opposed it, up from 41% in October, according to a Reuters/Ipsos poll.
Local, Republican, commentators have also come out against it and pushed their senators to block it – to no avail. A Kansas City Star editorial called Trump’s plan the “evil twin” of the Brownback plan. “Newsflash from the Heartland: This won’t end well,” wrote the paper’s editorial board.

The paper’s columnist Steve Rose, who described himself as a “Bob Dole Republican” wrote: “To sell this massive tax cut for businesses and the wealthy as a boon to the middle class is an outright distortion. And to claim the bill is not a trillion-dollar-plus budget buster is either a bald-faced lie, or those who support it are living in the same fairytale as Kansas governor Sam Brownback.”

Brownback’s plan led to electoral defeat for his supporters in 2016, and the election of moderate Republicans he had fought with to pass his plan. His political career is now in limbo. Trump had tapped him to be his ambassador-at-large for international religious freedom but that appointment seems to have gone into a holding pattern – despite recent protestation that his plan worked.

“Sometimes things have to get really bad before they change,” said Ochs. “The lesson we should take from Kansas is that you can put reasonable people together to work together to find solutions. That is something Kansas needs right now. Frankly, it is something that the country needs.”

https://www.theguardian.com/us...

MORE NEWS

New Panama Papers Leak Reveals Firm’s Chaotic Scramble To Identify Clients, Save Business ...

New Panama Papers Leak Reveals Firm’s Chaotic Scramble To Identify Clients, Save Business Amid Global Fallout
On March 9, 2016, employees of Mossack Fonseca, a Panamanian law firm that for decades had kept the financial secrets of global celebrities,...

Dodgy dating sites use tax haven overseas to slip by police

Dodgy dating sites use tax haven overseas to slip by police
A shifty character named “Kariya” helped shady online dating sites avoid the law in Japan by establishing their headquarters abroad with ...

US Treasury Department targets Singapore for money laundering

US Treasury Department targets Singapore for money laundering
Last month, the Asia Sentinel reported that the US Treasury Department has initiated a wide-ranging campaign against money laundering ...

Who's behind the blog

Who's behind the blog

SOCIAL MEDIA