Asa! Hutchinson rolls out an income tax cut plan | Arkansas Blog

Tuesday, November 12, 2013

Asa! Hutchinson rolls out an income tax cut plan

Posted By on Tue, Nov 12, 2013 at 9:28 AM

click to enlarge ASA!: Note that the Hutchinson campaign logo, which was Asa! in his 2006 loss to Mike Beebe, has now moved the exclamation point after Arkansas. - BRIAN CHILSON
  • ASA!: Note that the Hutchinson campaign logo, which was Asa! in his 2006 loss to Mike Beebe, has now moved the exclamation point after Arkansas.

Asa Hutchinson, one of three Republican candidates for governor, has called a news conference this morning to elaborate on his gubernatorial agenda. I'm guessing it will be aimed more at Democrats, given his presumptive front-runner role over Curtis Coleman and Debra Hobbs, though that's a potentially tricky course given the Tea Party preferences of many Republican primary voters.

I'll have more later.

For now, the Arkansas Democratic Party has taken a page from the Republican Party's book and helpfully offered questions for anyone who might like to ask them:

1. Do you support the private option passed by the Republican controlled legislature and signed by Governor Beebe?

2. Do you support funding the Private Option in the upcoming special session?

3. Have you spoken with the Arkansas Chamber of Commerce about your statement that Mike Ross' plan to phase out the tax on manufacturing replacement and repairs, which the Chamber supports, is "Obama’s plan" and "Special breaks, for special friends, for special industry?"

4. How do you plan on maintaining Arkansas's balanced budget and full funding for education, infrastructure and prisons given your plan to phase out the state's income tax?

Hutchinson's trying to have it both ways on the private option and will undoubtedly continue to do so. Oddly enough for a Republican candidate, I think he recognizes there's more to be gained from pounding a tax cut for the Chamber of Commerce, such as Democrat Mike Ross has proposed, than defending it. Phasing out the income tax is wholly unrealistic given its important share of the state budget. (Phase out being a different notion that making it progressive again.) Even a tiny income tax cut given in the last session was an iffy proposition against manifest needs and lukewarm revenues. But facts don't mean much to Tea Party faithful. It's funny to have a race where the Republican is casting himself as the populist. (Though his income tax phase-out would, in fact, be an enormous boon to the ultrawealthy and not truly populist.)

UPDATE: Hutchinson today, according to the Talk Business report, revealed his specific plan for an income tax cut. It's wildly expensive, but popularly gauged.

It would cost an estimated $100 million, a whopping reduction. It would cut the top tax rate from 7 percent to 6 percent for those making between $34,000 and $75,000 and cut from 6 percent to 5 percent the top rate for those making $20,400 to $33,999. The average tax cut for someone with $50,000 taxable income would be $300, he said. I'm trying to get the number of taxpayers affected, but it will be sizable. Hutchinson claims some 500,000 people would be affected.

What hasn't been talked about in reporting so far is how this falls on top of a huge range of existing tax cuts and the looming possibility that Obamacare falls apart. Other cuts or potential revenue changes in the works:

* $70 million by virtually ending the sales tax on groceries, if some economic targets are met, particularly the end of Pulaski desegregation payments.

* Cuts in the tax on capital gains tax, a reduction in revenue that is predicted to rise to $24.5 million by 2016.

* Cuts in the income tax rate at the top end to 6.9 percent, even for billionaires. That is expected to cost $56 million by 2016.

* The current budget is built on significant savings from the windfall in federal pickup of Medicaid costs under Obamacare. If that falls apart, all current budget bets are off, no matter what.

But, at a minimum, 2016 is a ticking time bomb if the economy doesn't improve, with $150 million in tax cuts in the pipeline BEFORE Hutchinson's $100 million.

Growth isn't currently sufficient to pay either one of those, with surplus collections running $16 million ahead of forecast in the first quarter of this year. Hutchinson bases his plan on a surplus for the fiscal year that ended June 30, when the state treasury was swollen by Obama stimulus money. Hutchinson claims there was a $299 million surprlus. This is disingenous, to put it as mildly as possibly. Blatantly dishonest is more like it.

Ernest Dumas explained a while back the phony Republican claims about the Arkansas surplus. It's explained by hundreds of millions in Obama stimulus money that has come to an end.

PS: Keeping bad guys in jail longer is going to cost $15 million a year, Mike Beebe has said. The state, thanks to teabaggers and a handful of small school districts, is for now out $8 million in base property tax millage that was supposed to be distributed statewide and now doesn't leave a handful of property rich districts.The highway contractors are begging for general revenue to keep their asphalt machines humming.

Does anybody in the Republican Party do arithmetic? 

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