Income tax cut for the rich speeding through legislature

Income tax cut for the rich speeding through legislature

Senate and House committees today gave speedy approval to the giant income tax cut bill, potentially at least a half-billion-dollar-a-year annual reduction in state revenue with 70 percent of the money going into the pocket of the top 20 percent of Arkansas taxpayers.

Senate and House sponsors heard some pushback from advocates for lower-income people and the sufficiency of state services. They dished out some lectures in return.

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“We have money,” Rep. John* Maddox said, pointing to reserve funds in answering fears of the cut harming services. In response to questions from Rep. Denise Garner on the flow of money to the wealthy he also said, “That’s just the way it is.” The rich pay more in taxes so they’ll reap more in dollars from a cut. But Maddox insisted that poor people will enjoy a bigger percentage tax cut. But Garner pointed out that a 13 percent cut in taxes doesn’t mean much to the poorest taxpayers, who might realize a $17 to $30 annually.  Even taxpayers making up to $100,000 a year won’t realize more savings than about a dollar a day, she said.

In the House committee hearing (the Senate committee approval was nearly perfunctory), Maddox was also pressed on the fact that the state is relying on federal dollars in pandemic relief that has swollen state reserve funds. A DF&A official, Paul Gehring, said the state can afford the tax cuts, though he also said the issue eventually would come down to spending. In response to a question,
Gehring said, “Obviously you could spend more if you didn’t cut taxes.” But he said estimates now indicate current spending can be sustained for the next two years if the tax cut is approved.

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Garner asked for any data to support the age-old argument that tax cuts make the state competitive and will produce economic development. Maddox said he had no data. “But I truly believe it.”

Garner, a Fayetteville Democrat, said her high-growth area is full of new people who aren’t talking about taxes, but are attracted by schools, infrastructure and vibrant culture.

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Republicans argued that low- and middle-income taxpayers had been covered in previous tax cuts. (They produced pittances for individual taxpayers and, in sum, only a fraction of what the new bill will produce in tax cuts for a tiny percentage of the state’s residents.)

Disingenuous testimony was the order of the day, including from House committee chair Rep. Joe Jett, a former Democrat who has sometimes evinced concern for lower-income people. He and others harped on percentage income tax cuts, rather than the dollar-impact of the income tax cuts, a figure Rep. Monte Hodges, a Democrat, pressed for.

Example: The backers of the cut emphasize 19 to 22 percent income tax cuts for people in the lowest income ranges. But these work out to $200 to $300 in annual savings. On the high end, the 1 percenters will reap 30 percent of the benefits, with an average tax cut of $10,000 a year by one estimate (Jett contends the number is skewed and the average is closer to $5,000, but he based his position on estimates of income and taxes in 2019, not current data). In contrast, the lowest 20 percent will receive about 1 percent of the tax cut, an average of less than $20 per person. Rich Huddleston of Arkansas Advocates for Children and Families emphasized these numbers, compiled in a study the Advocates had released earlier by a consultant the legislature has used in the past.

He also noted benefits of the corporate tax cuts will go in the main to out-of-state corporate shareholders, meaning money will leave the Arkansas economy.

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The big issue, Huddleston said, is impact on the state budget. He said his consultants estimate a $600 million annual impact because the state’s estimate doesn’t factor growth. He talked about shortcomings in education and other state services. Examples: The number of uninsured children has been rising; Arkansas falls short of providing for postpartum care for mothers. He also warned that a state match will be necessary to qualify for new federal infrastructure spending.

When asked about the sales tax burden on poor people, Maddox said that wasn’t part of this legislation. It is just about an income tax cut.

Rep. Jim Wooten berated Huddleston for talking about the need for more spending on various programs. He said he was “sick and tired” of people asking for “more, more.” He asked Huddleston: “How much do you want?” Rep. Robin Lundstrum also lectured Huddleston. She said taxpayers had been very generous in support of services.

The House committee got a specific answer to Wooten’s question on a dollar amount from a Forrest City man who said he wanted $37 million to get disabled people off the waiting list for home support services. He said he’d watched a family member rise no higher than 1,500th on the waiting list in 30 years. Perhaps when she’s 60, he’ll qualify, he said. He was buttressed by testimony on the shortage of workers for such jobs, including because of long hours and low pay.

Kymara Seals, policy director of the Arkansas Public Policy Panel, said her grassroots group is concerned about quality of life. Taxes are necessary to fund programs that help communities thrive. Some are thriving, but not all of the communities are thriving, she said. Example: Too many Arkansas kids aren’t in pre-K, she said.

Maddox closed by claiming the bill would incentivize work by giving people more take-home pay. The bill was approved on a voice vote.

*A previous version of this post used the wrong first name for Rep. John Maddox.

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