Voters in Wisconsin’s Republican primary on Tuesday can choose among Donald Trump, John Kasich and Ted Cruz, all of whom promise tax cuts that could cost as much as $10 trillion in revenue over 10 years—and an ensuing economic boom as spending is unleashed.
But Bloomberg reports voters need look no further than Louisiana, Kansas and Oklahoma to see what happens when economies fail to grow as promised.
Those states, which cut taxes in Tea Party-inspired measures, were in 2014 and 2015 among the bottom 20 of the Bloomberg Economic Evaluation of States, which measures changes in fiscal health. They face spending cuts, tax increases and higher debt.
“For years, our state spent more in corporate-tax breaks then we took in from income taxes,” John Bel Edwards, Louisiana’s new Democratic governor, says in an e-mailed statement to Bloomberg. “That practice has left critical state services on the chopping block.”
Louisiana plans to sell bonds this month in a refinancing that will let it postpone $80 million in debt payments. The deal will probably come at an elevated cost based on the recent widening of spreads between the state’s municipal bonds and top-rated securities; investors are demanding about a fifth of a percent in additional yield.
Oklahoma also may turn to the bond market to close a $1.3 billion deficit, and Kansas may sell securities backed by payments from a settlement with tobacco companies to stay afloat.
Sam Brownback, a former congressman and senator who became Kansas governor in 2011, presented his state as a model to the nation when he presided over a 26% cut in state income taxes, as well as reductions in levies on sales and businesses. He says Kansas was undertaking “a real live experiment” in economic growth.
As states crawled out of the recession’s wreckage, 17 plus Washington, D.C., cut income taxes from 2011 to 2015, according to the National Conference of State Legislatures. That includes Illinois and Delaware, which saw temporary increases end. This year, Indiana has passed a cut and more are pending.