THE NEW DEAL: Hutchinson pitches his new tax cut plan.
Further reporting on Gov. Asa Hutchinson's rewritten income tax cut
plan illustrates the point made here yesterday — it's almost entirely of benefit to upper-income taxpayers, with the very richest doing best of all.
Gone are plans to increase the standard deduction for all taxpayers. Gone are simplifications of tax tables that potentially produced some savings for lower- and middle-income taxpayers. Instead, the tax cut will come almost entirely from a drop in the top marginal rate of 6.9 percent to 5.9 percent for those making more than about $80,000 a year. It's a two-year phase-in before the full benefit is reached.
Here's the legislation, introduced
late yesterday by Sen. Jonathan Dismang.
The Arkansas Democrat-Gazette pointed
out everyone making more than $38,200 would get a tax reduction, but it would be nominal at the lower end.
The cut in this latest plan would be $12 for a person with net taxable income of $50,000; $37, income of $75,000; $59, income of $80,501; $253, income of $100,000, $503, income of $125,000; and $753, income of $150,000, according to the governor's office.
For every $50,000 in income over $150,000, add an additional tax cut of $500, or $8,500 more for a million-dollar income, for a total tax cut for that lucky duck of almost $10,000.
But this doesn't capture the weight of the benefits in this plan for the wealthy. Everybody who makes more than $80,000, about 14 percent of all taxpayers, will get a tax cut. Past experience tells us most of the dollars will flow to that group, and a disproportionate amount will flow to the very richest in that subset.
When fully implemented, the tax cut gives almost a 15 percent cut (that's the effect of a drop from 6.9 to 5.9 percent) in the tax bill on all income over $80,000. If you're a Walton billionaire, that's a LOT of money.
In 2016, for example
, state figures show a mere 15,500 Arkansas taxpayers had a total tax liability on income over at least $250,000 of almost $650 million. That burden will be lightened substantially when Asa's tax cut is fully implemented, probably by $65 million or so, or an average cut of more than $4,000 each.
Further analysis is expected from a tax think tank today or tomorrow that will provide specifics of how the benefits fall. But we know that Hutchinson's original tax cut plan gave two-thirds of the benefits to the top 5 percent (those making more than $200,000) and simple arithmetic says that percentage will likely hold on the new plan, perhaps be even more tilted toward the super-rich.
So, again: how do you cut the cost of a tax cut in revenue from $192 million to $97 million a year and still give a windfall to the superrich? Easy, take away tax cuts for the poor and the middle class. (The original plan also had a nasty kicker: an actual tax increase for some depending on the vagaries of where proposed changes in tax brackets fell. That's why it was rewritten. The new plan, we're promised, holds no tax increases for anyone.)
Dismang's legislation makes the case:
Reducing the top marginal income tax rate for individuals, trusts, and estates would reduce the overall tax burden on Arkansas taxpayers and provide relief for those taxpayers that have not received a significant reduction in taxes in recent years.
Democrats will try again to pass an earned income tax credit for poor workers. And they will question the impact on state services — schools, public safety, health care — from a big cut in state income. They will lose again.
All this is being done to claim a top marginal tax rate that matches surrounding states (except Texas, which has no income tax at all.) Missing in this simplistic sales pitch is a full explanation of the differences in property and sales taxes, higher extraction taxes and a laundry list of other factors about tax burden and state services that make a focus on marginal income tax rate disingenuously narrow-minded.
To play a similarly simplistic game: If the controlling factor was all about marginal income tax rates, Apple wouldn't be in California and Amazon wouldn't have chosen New York for a major expansion.
MIght education, workforce, infrastructure, aesthetic amenities, rigorous environmental protection and laws that reflect open arms to diverse people matter more than a 5.9 percent income tax rate for billionaires?
Or perhaps they prefer a state where some legislators' first idea after voters approve an increase in the minimum wage
is to introduce legislation to take the pay raise away. And cut Medicaid for the working poor while they're at it.