Kansans perform postmortem on Brownback tax ‘experiment’
President Trump’s likely nominee for the Federal Reserve’s board of governors helped shape the deep tax cuts that were blamed for years of budget shortfalls under former Gov. Sam Brownback.
Trump announced on Twitter last week that he plans to nominate Stephen Moore, his 2016 campaign’s economic adviser, to the seven-member board of governors for the Federal Reserve, the independent agency which oversees monetary policy and regulates the banking industry.
The prospect of a seat on the Fed for Moore, a fellow at the conservative Heritage Foundation who has called for board chairman Jerome Powell to be fired, rankles Democrats. They see the former Wall Street Journal editorial board member as unqualified for the position.
“I think Moore was selected because Trump read an article or he saw him on TV and he liked him and that was as far as it went. I don’t see him as a qualified person to be on the Fed,” said Sen. Sherrod Brown, D-Ohio, the ranking Democrat on the Senate Committee on Banking, Housing and Urban Affairs, which handles nominations to the board.
“This is essentially a lifetime… a years and years long appointment lasting through presidents. You don’t give these away lightly like Trump already has.”
Members of the board serve staggered 14-year terms. The most recent appointee, former Kansas Bank Commissioner Michelle Bowman, was confirmed by the Senate on a 64-34 vote last year.
Democrats will likely use Moore’s role in Brownback’s “real live experiment” against him even though the Fed does not directly deal with tax policy.
Senate Minority Leader Chuck Schumer, D-New York, pointed Tuesday to Moore’s role in shaping Trump’s 2017 tax cuts when he panned the likely nomination.
“Mr. Moore doesn’t have the background. He’s a politician. He’s political. He’s always wanted cut taxes, cut taxes, cut taxes. He’s one of the reasons we have such a big deficit now because of his advocacy,” Schumer said.
The White House declined to comment on Democratic criticism of Moore or say anything about the prospective nominee beyond the president’s initial tweet, which described Moore as a “very respected Economist.”
One of the lawmakers who will decide whether to advance Moore’s nomination— if Trump formally submits it— is a Kansan, Republican Sen. Jerry Moran, who sits on the committee. Moran’s office declined to comment on Moore’s possible nomination.
Sen. Mike Crapo, the Idaho Republican who chairs the committee, also would not comment.
Other Republicans on the committee say they’re ready to support Moore.
“On paper, he looks like a great nominee. I’m most likely going to support him and look forward to seeing the confirmation hearing,” said Sen. Thom Tillis, R-North Carolina.
Moore is a long-time collaborator with Art Laffer, the economist who was principal architect of Brownback’s tax plan. The pair subscribe to the “supply-side” theory of economics that calls for deep tax cuts as a way of stimulating growth. They have also worked with Rex Sinquefield, a St. Louis billionaire who has championed tax cuts in Missouri.
In a 2012 paper Laffer and Moore said “cutting taxes can have a near immediate and permanent impact, which is why we have advised Oklahoma, Kansas and other states to cut their income tax rates if they want the most effective immediate and lasting boost to their states’ economies.”
Laffer was paid $75,000 by the Brownback administration for consulting work on the tax plan.
Moore’s role was less formal. But he was in communication with Brownback both in the lead-up to passage of the 2012 tax cuts and the years that followed, during which Kansas weathered a series of budget deficits.
Kansas eliminated individual income tax for the owners of limited liability companies and other pass-through businesses. The state also sharply reduced income tax rates across the board as part of Brownback’s “march to zero.”
Mike O’Neal, the former Kansas House speaker who oversaw passage of the tax plan, said Moore may have worked with Brownback behind the scenes but that he did not meet Moore until after the plan passed.
“He was generally supportive of what Kansas was trying to do,” said O’Neal. “But I have no idea if his DNA was in it.”
The Heritage Foundation, where Moore serves as a fellow, also did not immediately answer questions Wednesday about Moore’s role in shaping Kansas tax policy during the Brownback years.
Moore took credit for advising Brownback on “an aggressive tax rate reduction plan to help revive an underperforming Kansas economy” in a 2014 issue of State Tax Notes.
“It’s true, tax cuts don’t have magical powers, and it is an oft-repeated caricature by the left that Laffer and I and others believe that to be true… But what is irrefutable from the evidence in the states is that strategic tax rate reductions can ignite growth and employment,” Moore said.
Moore emerged as one of the most prominent defenders of the plan in the years that followed its passage, penning numerous articles, including a 2014 piece in The Kansas City Star when Brownback was locked in a tight re-election race.
The article, a response to economist Paul Krugman’s criticisms of the Kansas tax plan, contained false job data from four states to support his argument that Brownback’s tax cuts were working.
The Star corrected the data after then-opinion columnist Yael Abouhalkah fact-checked Moore’s writing. It has not published a piece from Moore since then.
Brown pointed to the 2014 controversy when asked about potential nomination, saying that it showed that Moore lacks credibility.
“We would expect a liar to appoint somebody who lies a lot,” Brown added, in reference to Trump.
Kansas consistently lagged the national average in job growth after implementing the tax cuts. When Kansas lawmakers overrode Brownback’s veto to repeal the policy in 2017, Kansas was one of only four states that had lost private sector jobs over the previous 12 months
The bipartisan override came after four straight years of budget shortfalls that required cuts to higher education, Medicaid, and other state services.
“I wouldn’t let Stephen Moore within 100 yards of my enemy’s piggy bank, let alone the Federal Reserve,” said Annie McKay, president and CEO of Kansas Action for Children, an advocacy group that helped champion the repeal of Brownback’s tax cuts in 2017.
McKay said that Moore’s “voice was lent to the Kansas experiment and stayed with it right up until the ship sunk.”
“Stephen Moore’s a pretty sharp guy. I know he’s not the traditional Fed candidate that some presidents in the past have appointed, but I think he’ll bring a fresh perspective to the board,” said Estes, who said he met Moore while he was serving as Kansas treasurer during the years Brownback was governor.
Following the state’s budget shortfall, Laffer and Moore pointed to spending as the source of Kansas’ financial woes, writing in in 2015 that the “Kansas experience demonstrates that states cannot significantly reduce taxes without also prioritizing spending reform.”
This argument was echoed by supporters of the tax cuts up until their repeal.
State Rep. Jim Ward, a Wichita Democrat, said that Moore’s role in influencing Brownback’s policies should preclude him from a seat on the Fed’s board.
“If he brings the financial philosophy that he espoused in Kansas six years ago that’s very dangerous for the U.S. economy,” Ward said.