Talking a tax increase | Arkansas Blog

Friday, November 5, 2010

Talking a tax increase

Posted By on Fri, Nov 5, 2010 at 1:32 PM

Welcome to reality, freshmen Republicans and Tea Partyers.

Talk Business reports that Randy Zook, leader of the Arkansas State Chamber of Commerce, told a Fort Smith group today an increase in the amount businesses pay for unemployment compensation (a tax), will have to go up because of accumulating deficits in the unemployment trust fund. It's potentially a billion-dollar issue for the state unless the federal government, which extended benefits in the recession, picks up some of the cost.

Do the no-taxers dig in their heels and oppose a business community plan to phase in a payback?

CORRECTION: I didn't explain this correctly initially. I made it appear that this money is part of the budgeting process. It's not. There's no making up a failure to pay an increased tax to replenish the fund out of existing spending. (As I originally wrote, that wouldn't be possible anyway.) What happens is if the state doesn't begin restoring the money, the federal government will impose a tax to make it up and it will be a stiffer tax than the one set by Arkansas law. That's why cool heads in the business community are anxious to get it fixed.

Arkansas legislators can stand on a principle never to vote for a tax increase. But that vote will effectively mean in time a higher federal tax, according to an explanation I just got from Zook. This situation has happened previously in big recessions, by the way.

No-tax pledges are easy. Talk is cheap. Legislating is harder. Maybe they can all meet at the pole for a prayer.

The need for a tax increase comes just as Republicans have nailed down 12 seats of 20 on the House Revenue and Taxation Committee. Will they tell the State Chamber to stick it where the sun don't shine?

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