Kansas Tax Cuts Show Why Spending Matters

In 2012, Kansas lawmakers made a bold move: they slashed income-tax brackets and even set the rate for many small businesses to zero. The plan was touted as a boost for growth, but it left the state’s coffers thin.

The Fallout

• By 2014, general-fund receipts had dropped by $600 million—a hit the state couldn’t recover with ordinary economic growth.
• At the same time, lawmakers raised spending by nearly $380 million in the budget that passed just before the tax bill.
• Cutting taxes while piling on new programs is not a recipe for prosperity, yet both parties approved the increase.
• When revenue fell short of forecasts, the state turned to promised “efficiency” studies that identified $2 billion in savings over five years. Only a fraction of those cuts were ever made.

The Consequences

• Public schools faced budget gaps.
• Mental-health services stretched thin.
• The state had to divert $1.4 billion from transportation projects for short-term relief.
• Some of these problems predated the tax cuts, but the reduced revenue limited Kansas’s ability to respond.

External Shocks

• The state’s main industries—farming and oil—suffered sharp price declines between 2014 and 2016, further squeezing the budget.
• Kansas’s job growth lagged behind national averages, and net migration turned negative as people moved elsewhere.

Lessons Learned

Other states—Indiana, North Carolina, and Tennessee—lowered taxes without the same crisis. The key lesson? Tax cuts must be paired with responsible spending and genuine efficiency gains, not just paperwork.

Missouri’s Debate

Missouri’s current governor is talking about a gradual elimination of the state income tax, funded partly by higher sales taxes. The debate now is whether that plan will balance the books and who will shoulder the cost. Kansas’s experience shows that cutting revenue without tightening spending can backfire.