Newspaper article Charleston Gazette Mail

Buyer Beware in W.Va., as in Kansas

Newspaper article Charleston Gazette Mail

Buyer Beware in W.Va., as in Kansas

Article excerpt

West Virginians, watch out! Arthur Laffer visited recently to give you advice about taxes and the West Virginia economy. He said that if your lawmakers would just get rid of state income taxes, especially for the wealthy, your state economy would prosper. Laffer is a conservative economist who for years has traveled the nation trying to sell the idea that lowering upper income tax brackets leads to better economic conditions without hurting budgets.

Lower taxes and economic prosperity. Isn't that a seductive combination? It sounds like everyone's dream.

It sure sounded good four years ago in Kansas too, when we paid Mr. Laffer to visit. He told Kansas lawmakers a similar story - if you make big cuts in the income tax, your economy will grow, job creation will spike and the resulting economic activity will still bring in enough revenue to fund the state budget.

Kansas bought it. Our lawmakers made dramatic cuts to state income tax rates and exempted most businesses from paying income tax at all. Our governor, echoing Laffer, announced that these actions would be like a "shot of adrenaline to the Kansas economy."

What happened next? In the first full year that the tax cuts were implemented, state general fund revenue dropped a stunning $700 million (11 percent) from the year before, and then kept going down. Kansas no longer had enough income to pay normal expenses, so the state began using up its reserves. When the reserves were gone, lawmakers transferred money from the state highway fund and from just about any other fund that had available cash.

An excellent highway system and strong public schools have always been a key to economic health in Kansas, but a rapidly dropping revenue steam compromised funding for those areas. Transferring money from the highway fund to shore up the general fund came at the expense of road maintenance projects. …

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