Talking Points Memo has some good coverage of the cagematch between our Governor Nixon and Texas Governor Rick Perry that centers on the relationship between tax rates and jobs. TPM raises a point that is significant in view of the upcoming veto session, where at least some state GOP lawmakers will vote to override the Governor’s veto of the disastrous HB253, which would take a tiny nibble out of the income taxes of most middle-income earners and a great big giant bite out of already very low corporate income taxes:

Tax rates, like what Perry and Scott have been flaunting, are oftentimes the favored incentive for governors hoping to lure new business from elsewhere. Actually, Muro said, there is little research to suggest that a business actually sees larger profits or more job creation from moving to a state with a lower tax rate.

“That one’s a particularly fatuous offering because many relocation studies notice that taxes often aren’t a huge part of the operating budget so that that is often the peripheral consideration,” Muro said.

Muro pointed to a study he did with Kenan Fikri, also of Brookings, which found that states are better off trying to foster homegrown businesses rather than through bringing in business from other states.

“The best way to create more jobs in a state is to grow them at home, rather than poach them from elsewhere,” the report said. “Some 95 percent of all job gains in a year in an average state come from the expansion of existing businesses or the birth of new establishments.”

The article notes that Texas has had its credit rating downgraded under Perry’s leadership. Kansas has also seen its creditworthiness downgraded since it started the process of eliminating income taxes – a somewhat cloudy effort it should be noted, since in order to avert total disaster, Governor Brownbeck is trying to come up with more indirect revenue raising schemes, including higher sales taxes.

What is clear about the Kansas experiment, though, is that whether or not there is eventual growth it will be hard times for many years:

What these changes will mean for the Kansas economy over the long-term is a matter of intense debate. A study by the state Department of Revenue predicted 23,000 new jobs for the state by 2020, above and beyond the job growth Kansas otherwise would have experienced. Others are skeptical. A forecast from the Kansas Legislative Research Department, which didn’t account for any economic benefits from the tax cuts, said that they will result in a series of shortfalls that add up to $2.5 billion through fiscal year 2018.

As for job growth, if it ever happens in Kansas,  expect to see low-wage jobs and sweat-shop conditions, especially since wrecking unions seems to be a related goal of the tax-cutters. Bad schools, a poorly educated, poorly paid population with no public services to alleviate their situation, equals a corporate paradise for select types of industry – the type that have mostly preyed on third world countries in the past. As for forward-looking, entrepreneurial businesses offering good salaries, expect to see them thriving in more enlightened parts of the country.

The current employment situation in Texas tends to support this thesis:

As Gov. Rick Perry continues to tout Texas’ low-tax, low-regulation business climate as the secret to the state’s relative economic strength, critics have pointed to Texas’ [high] unemployment rate and low-wage jobs, noting that Texas ties Mississippi for the highest percentage of minimum wage workers.

While loose regulatory policies have permitted many environmentally dangerous practices in the energy sector have probably contributed to growth of Texas biggest engine of new jobs, energy extraction, even supporters of the Texas low-tax climate have to admit that as far as the energy industry goes:

… the governor cannot take credit for recent discoveries of shale formations, the price of oil or “many other factors that have provided Texas with a competitive advantage in recent years.”

I have to admit that I am beginning to think that all the talk about growth is a smokescreen and that the point of this tax-cutting is precisely the social service cuts that everybody pretends to deplore. Jobs – who cares? If job creation were to pick up in Kansas while the same folks hold the reins of the state government, you shouldnt expect to see any new revenue going to education, which has been cut way past the bone, or to provide other services – the tax cutting experimenters, after all, are usually the ideologues who oppose the very idea of public education, call for privately-owned toll roads, and privatization of almost all government functions. I suspect that these folks are getting just what they want – and that many of their compères in Missouri, the ones that are capable of figuring out how to open a paper bag unaided, that is, actually want the same thing.

If none of this sounds too appealing, perhaps you should let your state legislators know that you won’t be too happy if they vote to override HB253, Senators can be found here and representatives here.

Today Governor Nixon stepped up and met his responsibility to the state and we owe him bigtime:

Nixon vetoed the disastrous GOP tax cut bill HB253. Over a ten year period, the bill would have cut corporate income taxes from 6.25% to 3.5%, and personal income taxes from 6% to 5.5%. As Nixon explained, “with a price tag of $800 million, this legislation is an ill-conceived, fiscally irresponsible experiment that would hurt our economy and jeopardize funding for vital public services.”

The reaction was swift, with GOP legislators raging about how radical tax cuts are the only way that Missouri can compete with neighboring Kansas, which has gutted its tax system. The general theme seems to be that Kansas is thriving under its new tax regime; as the Missouri branch of the Koch-funded Americans for Prosperity (AFP) put it when decrying Nixon’s move, “Many of our neighboring states have made bold reforms in the area of taxation, which have catapulted their states into being some of the most economically strong states in the union.”

Kansas is economically strong? Surprising news indeed – although it is not so surprising that it comes from the AFP since an AFP consultant on budgetary matters has been appointed Kansas’ budget director. The jury is still out (way, way out) on whether the tax cuts will spur growth – although we do know that the Bush tax cuts did not result in an economic boom – the Obama administration has already, in five years, bested the eight-year Bush administration record of job creation – in spite of having to beat back the massively deep Bush recession.

Right now, Kansas is not only promulgating a “red-state economic model”, it’s seeing reams of red, red ink that is. A predicted loss of $700 million dollars in revenue for the fiscal year beginning in July means serious budget cuts are ahead – and Kansas Governor Sam Brownback has already radically slashed spending. You name your program and it’s gonna be cut more and cut bad: education, transportation infrastructure, social services. And it’s likely to get worse if the tax-cutting experiment doesn’t work the way Kansas’ GOP is betting it will:

To make up for the revenue drop, the governor is pushing to preserve what was meant to be a temporary increase in the state sales tax, and to eliminate two popular deductions, including the state write-off for home-mortgage interest payments. Those moves would raise about $600 million next fiscal year. He also wants to transfer more than $100 million from a state highway fund to cover other expenses.

Estimates prepared by the state’s legislative research department predict that, even with the steps Mr. Brownback proposes, Kansas is on track to be short of money. The estimates suggest that the state will need to lean on its reserves in the coming years, and lawmakers by 2017 will be forced to make $780 million in spending cuts to prevent a deficit, which isn’t allowed under Kansas law. A Brownback aide said the forecasts don’t take into account the beneficial impact of the tax cuts.

Although, given the sales tax situation, one can argue that Kansas hasn’t really eliminated income taxes, it’s just asking poor folks to pay for all that magical economic growth that will surely reveal itself any day now. Huffington Post quotes one Kansas resident who states that if the home mortgage deduction is eliminated, she will move back to Missouri. Ironic, no?

But not surprising since Kansas is taking a big gamble on radical supply side economics with no real evidence that it will work – and lot’s of history that says it won’t. Why do Missouri’s legislators want us to jump off the same cliff? Shouldn’t they at least wait to see if Kansas survives the fall? Governor Nixon is right to insist that we proceed cautiously and make sure that we can take care of our citizens’ needs. HB253 was passed by a vote of 103 to 51, six votes less than the number required to override Nixon’s veto. We’ve got to keep it that way or we’ll go the way of Kansas.