June 8, 2017

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Latest News, Virginia

The Gillespie Tax Plan: From the People Who Brought You Sam Brownback’s Kansas Disaster

Gillespie Pitches the Phony Math That Kansas Republicans Just Rejected

 When something seems too good to be true, that’s because it usually is.

Kansas Republicans just found that out the hard way.

After five years of financial chaos, the Republican-dominated legislature voted to end the infamous Brownback tax cuts that put the state in shambles.

“The Republican-dominated Kansas Legislature that has soured on Gov. Sam Brownback’s vision for the state voted late Tuesday to roll back the governor’s signature tax cuts.

“Lawmakers marshaled together a coalition of moderate Republicans, conservatives and Democrats to overcome the governor’s opposition to seeing his landmark tax cuts, which have in large part come to define his tenure in Topeka, fundamentally come to an end.”

Even though the Kansas experiment was an unmitigated disaster, Republican Ed Gillespie wants to bring the same thinking to Virginia.

Throughout the Virginia Republican primary, Gillespie has fended off questions about his across-the-board 10% tax cut that supposedly returns $1,300 to a “typical family” without hurting the state budget. Everyone from fellow Republicans to independent analysts has poked holes in the plan that cuts taxes on the rich far more than for the middle class.

The Washington Post dubbed Gillespie “Mr. Free Lunch”, for pitching a plan that relies on a “miracle of modern math” to make any sense. Fellow Republican candidate Frank Wagner hasn’t minced words about the plan either, calling it “dishonest, phony math and bad public policy.”

So, who’s behind this phony math? Gillespie points to the Beacon Hill Institute, an ultra-conservative Koch-funded think tank in Massachusetts. Beacon Hill was the main validator of the Brownback tax cuts in Kansas.

Grover Norquist of the far-right Americans for Tax Reform also praised Gillespie’s plan. Another tax plan he vehemently defended? Governor Brownback’s cuts in Kansas.

The same people who said Kansas was geared for growth are telling us to trust Gillespie in Virginia. No chance.

“Ed Gillespie keeps pushing a carbon copy of the failed plan in Kansas,” said DGA Communications Director Jared Leopold. “Gillespie’s tax plan would blow a giant hole in the budget, threaten Virginia’s AAA credit rating, and starve school funding. Even Republicans in Kansas just rejected a Gillespie-style plan for the damage it did to the state. Make no mistake: Ed Gillespie’s plan would turn Virginia into Kansas.”

 

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Background:

Washington Post Editorial: Gillespie’s Approach “Crippled States Such as Kansas and Louisiana.” According to a Washington Post editorial, “As for Mr. Gillespie, he insists his plan, which includes cutting income-tax rates by 10 percent, would barely cause a ripple — as if his $1.3 billion giveaway would simply go unnoticed, or that no programs need suffer if inflation outstrips state spending. That’s the kind of approach that crippled states such as Kansas and Louisiana, where Republican governors took a scythe to revenue, pretending the result would be an economic boom; in fact, they gutted core services and sent investors fleeing.” [Washington Post, Editorial, 4/18/17]

Gillespie Campaign Said Think Tank in Boston Used Computer Model to Predict Higher Impact for Gillespie’s Tax Cut. According to the Daily Press, “Pressed to show its math, the Gillespie campaign pointed to a think tank in the Boston suburbs and a computer model using ‘thousands of equations solved simultaneously’ to look into the future of Virginia’s economy. It predicts a boost in household wealth and, thus, higher impact for Gillespie’s promised income tax cut.” [Daily Press, 5/2/17]

Gillespie Literature Says “Typical Family” will Save $1,300 a Year, Beacon Hill Math Says Family Needs to make $135,000 a Year for those Savings. According to the Daily Press, “Gillespie has made a 10 percent cut in Virginia’s income tax rates the centerpiece of his campaign for governor. One of his central pitches is that, once phased in, this will save families nearly $1,300 a year. Some campaign literature simply says ‘a family of four’ will see these savings. Elsewhere the campaign promises this for ‘a typical family.’ Math from the Beacon Hill Institute, which Gillespie used to score his plan, says that family will need to make $135,000 a year.” [Daily Press, 5/2/17]

Suffolk University Severed Ties With the Beacon Hill Institute Over Ties to the Koch Brothers. According to TIME, “And earlier this month, Suffolk University in Massachusetts split with the Beacon Hill Institute, a conservative think tank it helped fund — along with the Charles Koch Foundation. Beacon Hill Institute plans to continue operating without a college affiliation.” [TIME, 12/15/15]

The Beacon Hill Institute Said Tax Reform in Kansas Would Not Result in Billion Dollar Deficits. According to a joint report by the Kansas Policy Institute and the Beacon Hill Institute, “Tax reform will not result in multi-billion dollar deficits. A spending reduction will be necessary but a one-time adjustment of approximately 8.5% would be sufficient to meet all statutory and constitutional budget provisions and quite likely allow real spending growth (inflation-adjusted) in future years.” [Beacon Hill Institute, 7/2012]

Beacon Hill Said Tax Changes Should Result in 33,430 Additional Jobs by Mid 2018 and $800 Million Back in the Private Economy. According to the Kansas City Star, “The tax changes should deliver 33,430 additional jobs in Kansas by mid-2018, according to the Beacon Hill Institute at Suffolk University in Boston. Its analysis appeared in a report last July from the Kansas Policy Institute in Wichita, which supported the tax cuts. ‘You’re putting $800 million back into the private economy,’ said Paul Bachman, an economist at Beacon Hill. ‘People have that money to spend.’ Slashing state taxes also gives Kansans incentives to work, save and invest, Bachman said.” [Kansas City Star, 1/12/13]

  • In March 2017, Kansas Was Facing a Projected $1.1 Billion Deficit. According to the Los Angeles Times, “The financial woes of Kansas, which is facing a colossal budget shortfall, took another odd twist this week, and an already messy situation got even messier. State government expenses are estimated to outpace income by about $1.1 billion through June 2019. So how to balance the budget? The answer has proved elusive, and the debate over what to do has embroiled the governor, lawmakers and, on Thursday, the state Supreme Court.” [Los Angeles Times, 3/2/17]
  • The Beacon Hill Institute Said Kansas Would Gain Up to $611.8 Million in New Revenue By Enacting Tax Cuts. According to a joint report by the Kansas Policy Institute and the Beacon Hill Institute, “There will be significant government revenue benefits of tax reform. The Pass-Through Model identifies $533 million in additional state revenue and local government would collect $395.9 million in new revenue. The Standard Model identifies $611.8 million in additional state revenue and local governments would collect $322.9 million in new revenue.” [Beacon Hill Institute, 7/2012]
  • December 2016: Kansas Faced a $350 Million Deficit with Projections of Larger Deficit in 2018. According to the Wall Street Journal, “In 2013, Mr. Brownback set out to create a lean, business-friendly government in his state that other Republicans could replicate. He now faces a $350 million deficit when the Kansas legislature convenes in January and projections of a larger one in 2018. The state’s economy is flat and his party is fractured.” [Wall Street Journal, 12/23/16]
  • To Fill Budget Holes, Brownback Took Away $2 Billion from Highway Funding. According to the Wall Street Journal, “The tax-cut plan was paired with other policy changes, and the top individual income-tax rate dropped to 4.6% from 6.45%. Kansas also reduced growth in state spending to an average of 1.5% a year under Gov. Brownback, compared with 6.6% under his predecessor, due to cuts in higher education, Medicaid and other programs. To fill budget holes, Mr. Brownback also won legislative approval to take about $2 billion from highway funding, delaying more than 30 transportation projects, according to the state transportation department.” [Wall Street Journal, 12/23/16]
  • Due to Budget Gap, State Forced to Make Cuts “To Most State Agencies, the State Pension System, Highway Projects and Universities.” According to the Wichita Eagle, “President-elect Donald Trump’s proposed tax plan for the nation is similar to Gov. Sam Brownback’s self-proclaimed ‘real-live experiment’ tax plan enacted in 2012. Both plans include a rate cut for individual income tax and cuts for business income, analysts say. Kansas faces a nearly $350 million budget gap for the current fiscal year, which runs through June. The budget gap has forced the state to make cuts to most state agencies, the state pension system, highway projects and universities.” [Wichita Eagle, 11/15/16]
  • Federal Reserve Bank of Philadelphia Ranked Kansas 50th for Employment Growth and Economist with Low-Tax Advocate Tax Foundation Told Lawmakers Kansas was “Example of What Not to Do in Tax Reform.” According to the Wichita Eagle, “In September, the Federal Reserve Bank of Philadelphia ranked Kansas 50th in the nation for employment growth, manufacturing hours worked, unemployment rate and wage growth. An economist with the Washington-based, low-tax advocate Tax Foundation told Mississippi lawmakers evaluating planned tax cuts that Kansas is ‘an example of what not to do in tax reform.’” [Wichita Eagle, 11/15/16]