Tuesday, July 10, 2012

A taxing question

Interesting article by Michael Cooper in the New York Times using Maryland and Kansas to explain the bets different states are making with respect to taxes.
As state governments begin to emerge from the long downturn, many are grappling with a difficult choice: should they restore some of the services and jobs they were forced to cut after the recession — or cut taxes in the hopes of bolstering their local economies?
Now, the Times may have a bias toward liberalism or progressivism, even in its reporting, so it comes as no surprise to me that Maryland's decision (under a Democratic governor and legislature) to raise taxes in order to preserve services is portrayed a bit more favorably than Kansas' decision to cut taxes further in hopes of increasing its attractiveness to businesses.
Gov. Sam Brownback of Kansas, who sought the Republican nomination for president four years ago, said that he was persuaded that his state needed to cut its income taxes and taxes on small businesses significantly when he studied data from the Internal Revenue Service that showed that Kansas was losing residents to states with lower taxes. “My viewpoint, and the viewpoint of the majority of the Legislature, was we’ve got to change our tax policy to attract more people and attract more businesses,” Mr. Brownback said in a telephone interview. “We’re just tired of losing in our league — I consider the surrounding states as our league — and we want to start gaining.”
[links omitted]

I have to wonder if Gov. Brownback is thinking clearly. I'm not saying he's foolish (though his fanatical religious devotion does render him less than clear-thinking or rational on certain issues), but these remarks make me wonder if he and the Legislature have asked themselves whether they truly understand why Kansas was losing residents. There is, evidently, a correlation between where ex-Kansans are moving and the tax rate, but as any statistician (or at this point, any reasonably experienced layman) will tell you, correlation is not causation.

Just because housing prices went down when you moved into your new home in 2007, doesn't mean you caused the downturn. Similarly, just because the tax rates are lower where Kansans are moving doesn't mean that's the reason they're moving to those places.

I have no idea what the data that the IRS provided says. Perhaps the IRS data doesn't provide crucial information that might suggest a different explanation. For example, could those fleeing the state be better-educated parents looking to escape the Kansas public education system's dreadful and much-ridiculed official stance on, say, evolution? When a state adopts such a transparently anti-scientific and anti-intellectual position, it loses credibility in the minds of those who would establish businesses that depend on rational thought and science, or those who simply would have their children taught the most accurate information science has to offer rather than religiously motivated claptrap.

It's not clear from the Times piece whether Brownback and his legislative allies are justified in drawing the conclusions they have. Their intentions are also suspiciously in line with Republican orthodoxy on the subject of taxes — enough so that were I a Kansan, I'd be asking the governor to prove that his assertion is the result of honest and thorough analysis rather than the ideologically determined outcome of a cursory examination of insufficient data.

And I'm asking the Times to give Brownback a chance to defend his tendentious statement. I think reporter Cooper and the paper owe him that.

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