Gov. Sam Brownback tonight foreshadowed an upcoming economic plan featuring deep tax cuts, streamlined regulatory processes and big changes in the public-employee retirement system.
Working with Arthur Laffer, the architect of former President Reagan’s supply-side economics, the Brownback administration is using advanced software to wargame various scenarios for cutting — and possibly over time eliminating — the state income tax.
Noting that Kansas loses about 3,000 taxpaying citizens a year, Brownback said he thinks tax cuts can reverse the trend of population outflow and bring more prosperity to the central plains.
“You’re going to see the middle of the country, our area will be the one that will grow,” Brownback said. “It will be the low-tax places, the places where people can go to be able to have a reasonable return on their investment, be able to have a reasonable job growth opportunity.”
Brownback spoke before a friendly pro-business/conservative crowd of about 350 at the annual dinner of the Kansas Policy Institute, a low-tax, low-regulation, small-government think tank.
The biggest spontaneous cheer of the evening was for a video of Reagan’s famed line, “Government is not the solution to our problem, government is the problem.”
Brownback offered only the broad outlines of his plan.
“We have to permanently reduce the marginal tax rates, we need to dynamically capture the growth that we get out of this for further reduction in taxes,” Brownback said. “That’s the model that we’re on, we’re going to be pressing that … we will come out with a full proposal with all the details necessary moving forward.”
Brownback said the plan draws heavily on Laffer’s economic theory that tax cuts lead to growth that ultimately creates more income for government than it had at a higher tax rate.
“That’s what the design of this will be, (initially) a static model, because to sell it to the Legislature, we’ve got to show we can produce those dollars,” Brownback said. “But we want the dynamic piece at the other end.”
What that means, according to the governor’s staff, is that the early years of the governor’s tax plan will be designed to keep the state’s current level of revenue without assumptions made of additional revenue growth. In the plan’s latter years, some of the added income from economic growth could be directed toward further tax reductions.
Brownback also signaled that he’s planning major changes in the Kansas Public Employee Retirement System, which faces a roughly $8 billion gap between promised benefits and the projected revenue to cover them.
The governor said he will advocate for transitioning state employees from their traditional pension to a plan more like the 401k retirement savings programs common to private sector employment.
“On KPERS, we’ve got to get to a defined contribution system for Kansas public employees,” Brownback said to loud applause. “And we will do this responsibly, a commission is working on this now, but this is clearly the way we need to move forward.”
The governor also outlined the progress his administration is making toward streamlining regulations and laws governing business. He said his staff has identified its list of the first regulations targeted for repeal and areas in which the government can make it easier to start a business.
For example, he said he’s planning a web site where prospective restaurateurs will be able to file a single permit application that will go to all the agencies with oversight authority at the same time. That, he said will eliminate wasted effort.
“You don’t have to walk into 10 places, you don’t have to wait in line at five different places, you’re in,” he said.
He said that’s the kind of service people expect from private-sector businesses and “We should expect no less out of our government.”
Brownback said he doesn’t expect the policies he’s proposing to stop at the state’s borders and has ambitions of them rising to the federal level.
“If we’re successful in these items, and I believe we will (be) … you’re going to see these things migrate federally,” he said. “It will never start in Washington.”
He said Kansas and other states with Republican governors will be “the laboratory of progress.”
“We’re the places to try models for us to grow as a country,” he said. “We did it, we tried it, we fit it and it works, then it moves.”