Thursday, April 23, 2015

Inequality watch: The great Kansas experiment has gone completely wrong, but Brownback and buddies don't get it

Evidence? Steven Benen writing at msnbc/Rachel Maddow Show reports on the mounting budget deficit and tanking revenue predictions. Moreover, the solutions contemplated would spare the wealthy and burden the poor. Here are snippets.

Kansas Gov. Sam Brownback’s (R) economic "experiment" obviously hasn’t gone well. The combination of debt downgrades, weak growth, and disastrous state finances have created an ongoing disaster in one of the nation’s reddest states.

Complicating matters, conditions aren’t improving. The state AP reported yesterday that Kansas is projecting the state will generate $187 million less in tax revenue than expected over the next year. The report is slightly worse than the projections Kansas officials faced a month ago, which were slightly worse than the projections the month before that.

Looking further ahead offers little relief. The unexpected shortfall is poised to get worse: the same projections show tax collections nearly $300 million below expectations through mid-2017.

The AP report added that the latest fiscal forecast is "likely" to force the Republican-dominated state government to "consider larger tax increases than they had expected to balance the state budget." That’s true, though as Max Ehrenfreund explained yesterday, who’ll pay shoulder the burden makes a big difference.

One thing they’re not considering: asking the wealthy to chip in. Instead, in a legislature that last week barred welfare recipients from using their benefits to go swimming or watch movies, the proposals that look most likely to succeed are sales and excise taxes that would be paid disproportionately by Kansas’s poor and working class. […]

People who make less are more vulnerable to increases in sales and excise taxes, since they spend more of their money buying basic goods and services they need to get by. This is especially the case in Kansas, where food is subject to sales tax. Kansans can receive a tax rebate for their food purchases, but those who make nothing or too little to owe income tax aren’t eligible. They pay the sales tax on food in full.

It’s best to call this what it is: a redistribution of wealth, from the bottom up.

Making matters slightly worse, proposed sales-tax increases probably won’t be enough to cover Kansas’ projected budget gap. They’ll have to find more money somewhere else.

Place your bets on what the Brownbackians will cut next.

Some radical "experiments" carry severe consequences. Brownback’s economic test is clearly one of them.

AZBlueMeanie at B4AZ reports on a related phenomenon: how the distorted distribution of wealth distorts the way people think about it.

Dean Baker at his "Beat the Press" blog at the Center for Economic and Policy Research responds to Neil Irwin in "NYT Misses Story on Redistribution: Maybe People Don’t Want Government Policies that Rig the Deck for the Rich".

Neil Irwin had an interesting Upshot piece that noted polling data showing people do not favor much higher taxes on the rich. It questioned why it was that people were opposed to redistribution even though inequality has become a major national concern.

Given a whole set of policies that have redistributed a massive amount of income upward, it is understandable that many people would not trust the government to be taxing the rich to help the poor and middle class.

That’s a fair assessment: those with wealth and power write the rules, and they write the rules to benefit themselves at the expense of everyone else. In other words, "the game is rigged," as Sen. Elizabeth Warren frequently points out. Warren in Minnesota: ‘The game is rigged’: "The game is rigged, and the Republicans rigged it," Warren said.

Given the number of billionaires who are buying up presidential candidates like they used to buy up race horses, it’s little wonder average Americans have lost faith that any candidate is going to represent their interests over the demands of the billionaire who financed their campaign, and expects a quid pro quo return.

As one example of the distorted national understanding of inequality consider the change in debate over marginal tax rates. In 1980, the rate was 70%. By the administration of Shrub (Bush 2), the rate had dropped to 35%. Obama got it back only to 39.6%. So the debate has changed from 70 vs. 35 to 40 vs. 35.

There's more under this hood so do read BlueMeanie's post.

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