Our advice to Lt. Gov. Bill Halter is that he forgo his pursuit of a state lottery, at least for a time, and devote his energy instead to seeking an increase in the state severance tax on natural gas. (Mr. Halter has not sought out our counsel, but if we waited for people to ask, we'd never get rid of the stuff, and we're overstocked as it is.)
There are several advantages to this plan as a way of producing new state revenue. A severance tax increase will be paid by people who can easily afford it. They might even welcome a chance to compensate for the unconscionably low rates they've enjoyed all these years. Might, we said.
An increase in the severance tax thus would make the regressive Arkansas tax structure a little less regressive. A lottery, on the other hand, extracts a disproportionate share of its revenue from those who can least afford to pay, continuing the unfortunate “soak the poor” strategy that Arkansas has long adhered to, even though it's kept us among the least prosperous of states. Furthermore, the severance tax is collected as part of the state's normal revenue efforts. Increasing the tax rate would not entail any significant new expense. State lotteries tend to use up most of the money they produce on perpetuating the lotteries themselves — more advertising and bigger pots so as to persuade losers to keep losing, as well as the establishment of new bureaucracies.
Arkansas has the lowest severance tax on natural gas in this part of the country, generating only $619,417 in revenue last year. A new report from state tax officials shows that if Arkansas had used the rates of surrounding states it would have collected anywhere from $11.3 million (the Louisiana rate) to $99.3 million (the Texas rate). Such a disparity suggests that lawmakers would leap at the opportunity to raise the tax, but that is not entirely true. Despite our earlier speculation, it's likely gas producers will not gracefully accept a higher tax but will instead oppose it. Any proposal that's opposed by wealthy special interests finds rough going in the Arkansas legislature, especially with such a fierce champion of special interests as Sen. Bob Johnson on duty. He never sleeps. If the legislative path is blocked, an initiated act might accomplish the same purpose. Either way will entail a long, hard fight, which is why Halter would be a good man to wage it. If anybody has the time to devote to a long hard fight, it's a lieutenant governor.