If Arkansas Republicans want state tax cuts, they should learn to love Obamacare | Arkansas Blog

Saturday, February 13, 2016

If Arkansas Republicans want state tax cuts, they should learn to love Obamacare

Posted By on Sat, Feb 13, 2016 at 1:10 PM

Telling exchange earlier this month on Twitter between Rep. Charlie Collins, co-chair of the Health Reform Legislative Task Force and a backer of continuing the private option and David Ray, the state director of AFP Arkansas — the conservative advocacy group opposed to the private option and attacking a couple of Republican incumbents who backed it. 

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Collins is no dummy. He wants to cut income taxes in Arkansas. If you have a conversation with Collins about pretty much anything, he will talk to you about how badly he wants to cut income taxes in Arkansas. 

The private option makes it easier to cut income taxes in Arkansas. That's because it saves the state budget money on net — more than $400 million between 2017 and 2021 according to the consultant hired by the state. Though the governor refuses to accept this, the consultant found that the net savings continue even after the state has to start putting in its full 10 percent share. 

The private option saves even more money between 2014 and 2016, when the feds picked up 100 percent of the tab. The legislature plowed hundreds of millions of the PO surplus monies into...tax cuts! 

To be clear, the reason that the PO is such a good deal for the state is because of the billions of federal dollars coming in. And Arkansans are federal taxpayers. But Arkansas taxpayers are coming out way ahead on this deal — the PO is a less-than-a-rounding-error sliver of the federal budget but the money coming in has an outsized impact on the state and its budget. Medicaid expansion is a very, very good deal for the parochial interests of individual states. If Arkansas chooses to end it, it will hurt turn off the faucet of billions of dollars coming in to the state. That will hurt hospitals, and the health sector of the economy, and other businesses that benefit indirectly, and of course 250,000 residents who will lose their insurance. But it will also hit the state budget, which means that either services will have to be cut or taxes will have to be raised. 

If you want to understand why a conservative like Collins is pushing so hard for the private option, just look at the budget. "I could care less about giving people more welfare but I refuse to punish Arkansas taxpayers," Collins told me at one point when we were discussing the PO last year.

I'm focusing on tax cuts here because folks like Collins have the majority in the Arkansas General Assembly and because the governor is Asa Hutchinson (it's no surprise that once Hutchinson looked at the budget numbers he started pushing to keep the private option, albeit with a new name). Of course, from the perspective of a liberal, this works just as well the other way: the private option helps the state budget, which allows more spending on something like pre-k. The point is that the private option gives more wiggle room for lawmakers, who can then duke it out over taxes and spending. The private option makes for a bigger pie of general revenue to divvy up. 

All of this is going to become crystal clear when the legislature convenes this April and the governor offers up two budgets — one with the continuation of the PO and one without. Sen. Jim Hendren has offered a preview of what that other budget without the PO might look like: "I don’t think some people understand that it's going to be hard. There’s going to be pain." If the budget is already squeezed, it's hard to imagine where Hutchinson is going to find room in the budget for tax cuts for the rich in the coming years. That's a big reason Collins and Hutchinson and co. are fighting to keep the private option.

The irony, then, is that if the Tea Partiers succeed in killing the private option, the result could be relatively higher state income taxes in the coming years than we would have if the PO sticks around. If Republicans want tax cuts in Arkansas, their best option is to learn to love Obamacare. 

Support for special health care reporting made possible by the Arkansas Public Policy Panel.

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