Tax cuts stymied in House; a new tax plan emerges UPDATE | Arkansas Blog

Thursday, March 3, 2011

Tax cuts stymied in House; a new tax plan emerges UPDATE

Posted By on Thu, Mar 3, 2011 at 9:16 AM

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The House Revenue and Taxation Committee will consider today what amounts to the Senate and Gov. Mike Beebe tax cutting agenda — a reduction in the sales tax on groceries by a half-cent; a used car sales tax reduction by moving the cap on exempt vehicles from $2,500 to $5,000, and a sales tax reduction on manufacturers' gas and electricity purchases.

The House, particularly the Tea Party Republicans, prefers tax deadbeat Ed Garner's tax cut for the wealthy on capital gains. They've smiled on a bunch of other breaks, such as the school goods sales tax holiday that was beaten yesterday in the Senate. So, the presumed divergence of outlook between the chambers — and particularly between the Republican contingents in each chamber — should be on display today.

UPDATE: See down below. The House is in no mood currently to pass Senate tax cuts.

But note this: There has emerged a third way on tax cutting. It's legislation sponsored by Sen. Michael Lamoureux and Rep. Kim Hammer, neither a member of the Republican Moonbat Caucus. It is very nearly radical. The summary:

It would repeal "certain income tax exemptions, credits, incentives, reduced rates and other sections of the Arkansas Code that reduce tax liability." Many of these, which are listed in the bill, are cherished giveaways to business. The loss of these exemptions — a tax increase for current recipients — would be offset by "corresponding reduction to the income tax rates for individuals, trusts and estates."

Using a five-year average on the gain from removed exemptions, state officials would calculate an indivdiual income tax rate based on the reduction in income tax receipts of a similar amount.

This is fiendishly complicated. Every one of those exemptions has a champion and a paid lobbyist — or 50. But Arkansas's top income tax rate of 7 percent kicks in at $25,000, where it was set in 1974 or thereabouts, and it's long overdue for adjustment.

This idea from mainstream Republicans, I think, is to put aside the divisive battle that otherwise could end with House Republicans defeating a reduction in the cost of poor people's groceries while advocating a break for rich people. The triangulation approach, they hope, will result in a jubilant parade for the resulting income tax break for all.

Outside the box thinking, for sure. But it has many complications, including the indexing of income tax rates that will take elasticity out of that source of state revenue. So careful reflection is in order.

UPDATE: Sen. Gilbert Baker pitched his use car sales tax as a way to reduce state spending by $7 million, the cost of the exemption. The bill was tabled on a motion by Rep. Uvalde Lindsey opposed by one audible no. Baker looked a little perturbed.

After Baker's rebuff, Sen. Bill Sample declined to seek a vote on his manufacturers' tax cut, though he defended the Senate version of the bill that gives a whopping exemption to gas used by independent power producers who sell wholesale electricity. It's a giveaway that creates no jobs, but puts a lot of money in pockets of the power generators.

Sponsors of Gov. Beebe's grocery tax cut quickly followed by saying they wouldn't seek a vote today either.

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