When Donald Trump cut top tax rates from 35% to 22% last year, it was hailed a tremendous victory for business. It was billed as a way to get corporations to stay in America and invite new people to move their companies to America. The same promise of new investment and new jobs make the proposal attractive to some.
However, when Kansas tried to do the same thing, it ended up creating budgetary shortfalls for education and healthcare. It also hurt businesses that relied on state contracts as a primary source of their business income. A few companies saw some benefit in the millions of dollars but most people did not see any benefit. The state legislature eventually put the tax rates back to where they were before.
A tax cut feels nice, but when a tax cut comes at the expense of things on which people rely, then the tax cut doesn’t feel so great. Taxes will go up through increased expenses and inflation. Many people don’t want to deal with that reality. Even that isn’t the fault of the everyday person. It has to do with the ever-stagnant wages that haven’t moved in decades.
Kansas is a cautionary tale about the new national tax policy. Just like Kansas, under President Trump, the national deficit has ballooned to over $1 billion per month (February) and the national debt (which he promised to pay off in 8 years) has steadily increased. The national debt is so high that even many Democrats, a party not known for worrying about debt and deficits, have remarked that it’s long past time to do something about the nation’s debt liability.
Learn more about how Kansas tried and failed to implement Trickle-Down economics.