Sugar High from the Tax Cuts

We now have not one but two states living with the aftermath of the kinds of tax cuts Trump and the Republicans just enacted: Kansas and Louisiana. This is part of an opinion piece in the New York Times by columnist David Leonhardt. The tragedy is that the worst of the impact on federal coffers might not hit until Trump is out of office — bad economic policy takes awhile to unfold.

David Leonhardt

David Leonhardt

Op-Ed Columnist

‘A failed state.’ Until recently, Kansas offered the clearest cautionary tale about deep tax cuts. The state’s then-governor, Sam Brownback, promised that the tax cuts he signed in 2012 and 2013 would lead to an economic boom. They didn’t, and Kansas instead had to cut popular programs like education.
Now Kansas seems to have a rival for the title of the state that’s caused the most self-inflicted damage through tax cuts: Louisiana.
“No two ways about it: Louisiana is a failed state,” Robert Mann, a Louisiana State University professor and New Orleans Times-Picayune columnist, wrote recently.
A special session of the State Legislature, called specifically to deal with a budget crisis caused by a lack of tax revenue, failed to do so, and legislators adjourned on Monday. No one is sure what will happen next. If legislators can’t agree on tax increases, cuts to education and medical care will likely follow.
The targets would include “health care programs that cover medically fragile children and the developmentally disabled, as well as the popular Taylor Opportunity Program for Students that provides tuition-covering grants for thousands of college students,” as Elizabeth Crisp of The Advocate, the Baton Rouge newspaper, explained.
Louisiana’s former governor, Bobby Jindal, deserves much of the blame. A Republican wunderkind when elected at age 36 in 2008, he cut income taxes and roughly doubled the size of corporate tax breaks. By the end of his two terms, businesses were able to use those breaks to avoid paying about 80 percent of the taxes they would have owed under the official corporate rate.
At first, Jindal spun a tale about how the tax cuts would lead to an economic boom — but they didn’t, just as they didn’t in Kansas. Instead, Louisiana’s state revenue plunged. The tax cuts helped the rich become richer and left the state’s middle class and poor residents with struggling schools, hospitals and other services.

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