Tax Cuts Without Spending Discipline: Lessons from Kansas and Washington

Originally published at Kansas Policy Institute.

From Topeka to Washington, too many politicians are combining tax relief with bloated budgets—and it’s putting future prosperity at riskKansas’s recent fiscal trajectory offers a cautionary tale for federal policymakers.

While tax relief is essential for economic growth, pairing it with unchecked spending can lead to fiscal instability. The state’s experience underscores the importance of coupling tax reforms with disciplined budgeting—a lesson Washington should heed as it considers the so-called “One Big, Beautiful Bill” (OBBB).

Kansas: The Perils of Overspending

Over the past decade, Kansas has seen both the promise and the peril of bold tax reform. In the early 2010s, the state attempted a major tax overhaul under then-Governor Sam Brownback, slashing income tax rates in hopes of spurring growth. However, the tax cuts were not paired with corresponding reductions in spending. Instead, state budgets continued to expand, and the resulting deficits sparked political backlash and fiscal instability.

Fast-forward to 2025, and Kansas again finds itself in a precarious fiscal position. The Legislature recently passed another tax relief package aimed at flattening income tax rates and reducing the property tax burden—moves that are pro-growth in theory. However, these reforms come alongside a surge in state spending. Our research at KPI shows that, for 2025 alone, the state budget is $8.7 billion larger than if spending had followed a responsible limit based on population growth plus inflation since 2005.

Spending per resident has soared to unsustainable levels, outpacing economic growth and increasing the burden on Kansas taxpayers. Kansas’s state government spending per resident was $5,428, placing it 23rd highest among the states. State and local tax collections per capita stood at $6,326 in 2022, ranking Kansas 24th nationally, well above no-income-tax states like Florida and Texas. This high tax burden helps explain why Kansas has seen a net outmigration of nearly 198,000 residents since 2000.

Forecasts show Kansas facing a $741 million deficit within four years. Assuming these projections are accurate, it is not because of the tax cuts but because of unsustainable spending growth. A decade after the first tax reform attempt, Kansas still grapples with the consequences of failing to control government expansion. The lesson is clear: even the best tax reforms can falter without fiscal discipline.

The Responsible Kansas Budget: A Blueprint for Reform

To address these challenges, Kansas needs to adopt KPI’s Responsible Kansas Budget (RKB). This simple yet powerful framework starts by demanding real cuts to inflated spending now—not just limiting future growth. Only then can state and local spending growth be effectively capped to population growth plus inflation, a measure of what taxpayers can sustainably afford.

By taking this two-step approach—cutting first, capping second—Kansas can reduce the government’s burden, avoid deficits, and create room for meaningful tax relief. This framework is a prerequisite for long-term stability.

The RKB also demands a shift toward performance-based budgeting. That means funding decisions should be based on outcomes, not historical inertia. Dedicated funds and earmarked programs currently dominate the Kansas budget, limiting lawmakers’ flexibility and reducing transparency. These automatic appropriations are a recipe for bloat and inefficiency.

A responsible budget should reflect real priorities, not legacy carveouts or special interests. And it should reject the fallacy of burden-shifting—replacing one tax with another—without actually reducing the total tax load on Kansans.

With a responsible budget and sound tax policy, Kansas could join the growing number of states advancing toward flatter and simpler tax systems. Over a dozen states have already adopted or are moving toward flat income taxes, and several—including Florida, Tennessee, and Texas—have eliminated income taxes entirely in favor of consumption-based models that encourage savings, investment, and growth.

Washington’s “One Big, Beautiful Bill”: Echoes of Kansas

At the federal level, the “One Big, Beautiful Bill” (OBBB) mirrors Kansas’s approach in its ambition and flaws. The bill includes several encouraging provisions:

• Extending the expiring 2017 Tax Cuts and Jobs Act (TCJA) provisions,
• Eliminating federal taxes on tips and overtime pay,
• Making some Social Security income tax-free,
• Rolling back Biden-era green energy subsidies,
• Adding modest reforms to Medicaid and SNAP.

These are meaningful steps toward a more growth-oriented economy. However, the bill’s excessive spending without immediate cuts, numerous carveouts in the tax code, and a massive $4 trillion increase in the federal debt ceiling undermine the positives. Rather than pursue a broad-based, neutral tax system, OBBB introduces more tax carveouts—targeted benefits for politically favored groups. This kind of special treatment is anti-growth, distorting economic decisions, and reducing fairness. Worse, the bill does little to reform the largest drivers of federal deficits: “entitlements.”

Medicaid Reforms: Necessary but Potentially Disruptive

Among the most important components of OBBB are the long-overdue reforms to Medicaid. These changes aim to rein in ballooning entitlement costs and require work among capable adults. For Kansas, however, this could initially create budgetary pressure if federal matching funds are reduced or enrollment drops more quickly than anticipated. However, short-term stress should not deter long-term reform. Kansas must begin to wean itself off the federal budget, in Medicaid and elsewhere, especially in programs where dependency has grown far beyond the original intent. Taxpayers in Kansas are being overtaxed to support an unsustainable federal system. Rather than fearing change, Kansas should seize the opportunity to modernize its Medicaid program, cut costs, and move toward a more state-driven and fiscally responsible healthcare model.

Tax Carveouts vs. Tax Reform

Whether in Topeka or D.C., the distinction between tax carveouts and true tax reform is critical. Carveouts are a form of cronyism: they reward lobbyists and special interests, not families and small businesses. They complicate the tax code, reduce transparency, and make it harder to achieve long-term economic growth. By contrast, real tax reform broadens the base and lowers the rate for all taxpayers. It removes distortions, encourages work and productivity, and treats taxpayers equitably. The federal government should follow the lead of states like Kansas (when done right), Arizona, and Iowa by simplifying the tax code and moving toward a broad-based consumption model, not patchwork exemptions. Simply shifting the burden from income to consumption taxes isn’t enough—real reform must actually reduce the total burden on taxpayers.

Why Spending Discipline Matters

No tax policy can succeed in the long run without spending control. When spending outpaces economic growth, the gap must be filled with higher taxes, borrowing, or inflation—all of which harm the private economy. We’ve seen this nationally, as federal spending exploded during COVID-19 and remained high even after the emergency passed. And let’s not ignore federal borrowing. With debt levels now nearing $37 trillion, future generations will bear the burden of today’s excesses. Every trillion in new debt erodes trust, crowds out private investment, and raises the specter of inflation.

In Kansas, the failure to reduce spending has led to budget shortfalls even in times of economic growth. That’s because the state government has locked itself into long-term obligations and special funds that leave little room for discretion. Every dollar funneled into a dedicated account is one less that can be used for tax relief or urgent needs. In Washington, the same problem plays out in the form of entitlement autopilot and defense contractor guarantees. Unless both levels of government prioritize spending restraint, tax relief will be short-lived and economic growth will stall.

As states and the federal government consider long-term reform, one of the most promising directions is a shift from taxing income to taxing consumption. Income taxes penalize productivity, savings, and investment—the very engines of economic growth. Consumption taxes, by contrast, are less distortionary and more transparent. A flat consumption tax, such as a final sales tax, aligns incentives and simplifies compliance. Texas and Florida have demonstrated the viability of no-income-tax models, relying instead on consumption-based revenue systems. Kansas should explore similar reforms by reducing reliance on income taxes and eliminating carve-outs that clutter the code. At the federal level, replacing income and payroll taxes with a broad-based consumption tax could boost growth, improve compliance, and reduce the tax gap. But that can only happen if spending is first brought under control to avoid just shifting the burden.

A Time for Courageous Leadership

The opportunity is clear: Kansas and Washington can implement sustainable, pro-growth tax reform. But doing so requires real courage. It means cutting unnecessary programs, resisting special interests, and saying no to budget gimmicks. It means adopting a responsible budget cap—like the RKB—and sticking to it. In Kansas, that starts with ending the use of dedicated funds to circumvent scrutiny. It means evaluating programs on performance and eliminating those that fail to deliver value. It means using surpluses for tax relief or debt reduction, not new spending obligations. It means getting Kelly Era spending surges under control. In Washington, it means pairing tax relief with real entitlement reform. It means capping spending growth and ending the practice of raising the debt ceiling without structural change.

Conclusion: The Path to Prosperity

Tax relief is not enough. Without spending discipline, it leads to deficits, debt, and future tax hikes. Kansas has seen this firsthand and must not repeat the mistakes of a decade ago. Washington is at risk of making the same errors now. The path to prosperity lies in cutting inflated spending now, capping future growth, enacting broad-based tax reform, and shrinking the government’s footprint. Only then can we ensure a truly free and prosperous future. Washington would be wise to follow.