Arkansas Advocates for Children and Families
has issued a statement calling Gov. Asa Hutchinson's income tax proposal
a step in the right direction, but lamenting its omission of the lowest income taxpayers from benefits. Said the Advocates:
The proposal maintains some small marginal tax breaks for those at the bottom (who make less than about $17,000 a year) that were already passed in 2013, but there is nothing new in the bill that would help low-income Arkansans. Workers at the bottom of the ladder pay about twice the tax rate of the richest people in our state as a percentage of income, and have benefitted the least from the current economic recovery.
The statement welcomes the tax break for middle income earners. And it also applauds the repeal of the capital gains tax, a boon to the wealthy that will be taken back this year. But tax cuts have consequences, the Advocates note.
By law, Arkansas has to pass a balanced budget. This means we have to pay for the loss in revenue either by either slashing program budgets or by finding another way to raise the money. This revenue loss comes at a time when the state is already underfunding a range of critical programs that are important to the state’s economic future and to children and families: the state’s ABC pre-K program, community-based rehabilitation programs for juvenile offenders, child welfare case workers and investigators, poverty funding for low-income students, higher education, and improvements to infrastructure like highways and roads. Ideally, the legislature will offset this loss by raising new revenue through other parts of the Arkansas tax system, rather than relying on budget cuts or using one-time funds. But no plans to do so have been announced. AACF will issue a report on responsible revenue raising ideas for the Arkansas state budget in the coming days.
In several ways, this plan is a move toward a more equal and fair Arkansas. However, we should be cautious not to take one step forward and then two steps back. Legislators and advocates should be wary of “Gateway” tax cuts that could lead to bigger, more irresponsible cuts for the wealthy down the road.
I've asked the governor's office for a comment on the omission of the lowest income. The thinking has been that the state provides for low-income taxpayers in other ways — nutrition and health assistance, for example.
It's uncertain if it will occur this session, but I have been told by Republicans that further incentives for higher end payers could be in the works, though they might be in the form of incentives for concrete development investment. There's also talk circulating of an earned income tax credit on the state level, though perhaps paid in a way that could be used only for health care, say.