Columns » Ernest Dumas

First things first

by and


The normal course in the Arkansas legislature has been to take care of the wants of big commercial interests and then, as an afterthought or else in requital for having served the big interests so eagerly, answer some small need of the working stiff or the larger class of the poor.

So in a year like 1991, after it passed out tax bonanzas to corporations such as sales tax exemptions for energy at steel mills and income tax credits, the General Assembly enacted a limited sales tax exemption on electricity for very-low-income families — those with a combined yearly income of less than $12,000 — if they went to the trouble of applying for it and satisfied the state. At the behest of Gov. Clinton, it also eliminated income taxes for very-low-income families, those below the poverty line. But it also raised the overall sales tax rate and taxes on gasoline and cigarettes, which more than wiped out the small tax favors to the poor but not to the corporations.

This year, you can at least make a case that the priorities are reversed. The legislature assembled with a mandate to give tax relief to families left behind in an economy in which incomes in the lower ranges have been nearly stagnant, especially in the Bush years. The big boys, in this instance all the manufacturers and processors, as an afterthought would get a few tax breaks — help on their light bills, for example.

That is progress, but in the end the results may not be too different from the past.

It is certain now that the statewide sales tax on groceries will be cut in half, to 3 percent. That is a bigger break for those far above the poverty line than those below it because some 560,000 Arkansans, roughly the poorest fifth of the population, buy groceries with food stamps, to which the sales tax has not been applied for 20 years. But if you are going to give a broad-based tax reduction, lowering or abolishing taxes on groceries is the fairest way to do it, far fairer certainly than every round of the “broad-based” Bush tax cuts.

House Speaker Benny Petrus wants to target tax relief to the genuinely poor and to some big commercial interests, manufacturers. The House passed bills helping upper-income retirees and giving a tax cut of $75 to single persons earning below $25,000 and to every person in families with joint incomes up to $50,000, but those may not become law. Instead, he may settle for shaving people earning below the poverty line from the tax rolls as Clinton did in 1991 and Dale Bumpers did in 1973. It will help some of the poorest workers and will not cost the treasury much money.

Manufacturers and processors will get their electricity bills cut by a significant amount. The House wants to halve the sales tax on their power costs, and Gov. Beebe will go along and shave his budget by another $20 million.

Not many regular legislative sessions have passed in 40 years when industries did not get some of their costs exempted from the sales tax. The accumulation of exemptions and reductions in income subject to taxation always leads eventually to another hike in the sales tax rate on individual consumers. It will again.

Nothing better illustrates the injustice of the sales tax than the electricity exemption for the remaining industries that pay it. The best help the state could give truly struggling families would be remove sales taxes on their utility bills. They live in the most energy-inefficient homes and, unlike the tax on food, the taxes on gas, electricity and water land heavily on every low-income family.

A few get some help under the federal Low-Income Home Energy Assistance Program (LIHEAP) but the formula favors prosperous states like Minnesota and not poor Arkansas, which gets only $13.5 million this year. More than 20 percent of Entergy’s 667,000 residential customers qualify as poor but only a few receive LIHEAP help or else have some of their electricity (the first 500 kilowatt hours) sales tax forgiven under the 1991 law.

While the legislature and the governor are responding to their progressive impulses about who should be relieved from the tax burden, they should look at the other side: those who don’t pay taxes but should.

Two proposals from past sessions leap to mind. The legislators who sponsored them, Rep. Phil Jackson of Berryville and Sam Ledbetter of Little Rock, were term-limited out.

Jackson’s bill would have stopped giant multistate corporations from avoiding taxes on their Arkansas income by shifting the income to passive subsidiaries in states like Nevada that don’t tax it.

Ledbetter would have made exploration companies like those drilling like mad into the Fayetteville shale formation pay a real tax on the removal of natural gas. Producers in neighboring Texas paid $4.1 billion last year in taxes on the gas they severed (7.5 percent of the market price).

That is about 10,000 times as much as they paid in Arkansas. You make up the difference.

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