Image Source: Kansas Gov. Sam Brownback's Twitter Page
They say the sea turns so dark that
You know it's time, you see the sign
They say the point demons guard is
An ocean grave for all the brave
Was it you that said, "How long, how long
How long to the point of know return?"
Point Of Know Return - Kansas
Economic theories should never be the basis for state fiscal policies.
Theories are just that - theories - until someone uses facts, data, and logic to either disprove or prove the hypothesis of a theory.
Why do red-state governors feel this insatiable need to put their residents through economic hell at the expense of arcane tax theories lifted from a textbook?
I thought about this after I just finished reading this article by Barry Ritholtz over at Bloomberg View, and I came away with the following thought: What the hell happened to Kansas?
Sam Brownback, the governor of Kansas, proposed the change to the state's tax code that would spur job growth and increase tax revenue to the state.
Sadly, his tax cut plan failed the good folks of Kansas. The tax cuts failed to stimulate any job growth and also managed to drain the state's coffers of badly needed tax reveneues. Because of the state's misfortune with tax revenues, many residents are leaving the state for warmer climes better job growth, giving new meaning to the phrase "We're not in Kansas anymore!"
Poorly planned tax cuts can, and have, starved governments of much-needed revenues for building better roads, funding schools to prepare students for 21st-century jobs and keeping kids healthy through programs like Head Start.
Which begs the question of whether one should move to another state based on tax rates?
The answer is a resounding no!
Tax policy in a state should be the least of your concerns when moving across country. Factors that should bear greater weight on what state to move to should be costs of living, affordable housing, good schools & colleges, access to public transportation, and especially job growth!
These factors cannot be strengthened by changes to tax policy alone.
So what does this have to do with you as an artist and an investor?
If as an artist you are looking to move from say Kansas to Texas (Hello, Austin!), you want to consider these factors closely before making a major decision like moving across the country.
As an investor, many state bonds depend on revenues from agency fees and income/property taxes to fund them. When a state sees a sharp drop in tax revenue like Kansas has, and residents are fleeing the state for other areas, those are ominous signs for a state's bond offerings to both individual and institutional investors.
The lesson to be learned here is not all tax cuts are job creators. Look to states whose tax policy is progressive and shows robust job growth over a number of years and across counties (looking at you, Washington!)
Thank you for reading @ellofinance this morning. Have a great week ahead!