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Federal Reserve Board nominee Stephen Moore has a poor track record on tax policy. He was a key architect of Kansas’ failed tax cut experiment from 2012, where policymakers reduced the top income tax rate from 6.45 percent to 4.9 percent. (1/5)
For income from some businesses – including partnerships, LLCs, S-corps, sole props – the rate was cut to zero. All of this was supposed to boost economic activity in general and business activity in particular. (2/5)
But after the tax cut, economic growth in Kansas lagged behind neighboring states and the nation as a whole, and the resulting anemic level of revenues led to ballooning shortfalls, causing significant cuts in vital programs. Kansas’s bond rating was also downgraded twice. (3/5)
Faced with a choice between cutting spending further or undoing some of the tax cuts, the legislature chose the latter. The episode was one of the cleanest experiments we’ve ever had in measuring the effects of taxes on growth, and it showed that they were a failure. (4/5)
Here’s more for my take on what happened in Kansas and why tax cuts do not guarantee economic growth (5/5): brook.gs/2rIFwmc brook.gs/2zKJD1a
