Hester says state can afford $105 million income tax cut | Arkansas Blog

Wednesday, October 26, 2016

Hester says state can afford $105 million income tax cut

Posted By on Wed, Oct 26, 2016 at 10:14 AM

click to enlarge SEN. BART HESTER: Has tax cut plan.
  • SEN. BART HESTER: Has tax cut plan.
Sen. Bart Hester, a Republican from Cave Springs who's been endeavoring lately to end state support for the state-owned War Memorial Stadium among other attacks on government spending, distributed a news release today saying he was working on a proposed $105 million income tax cut.

His plan would eliminate income taxes for people making less than $21,000 — people who were left out of the last two income tax cuts. But the biggest part of the benefit in terms of dollars would come at the higher end of the cuts.

Hester would expand the 5 percent income tax bracket from people making $21,000 to $35,000 to those making $25,000 to $50,000 a year. This would cut the number paying 6 percent, currently applied at $35,000-$70,000.

Those making more than $75,000 would get a .1 percent reduction in the top rate from 6.9 to 6.8 percent. That would be worth $150 to a married couple, each making $75,000.

He's also proposing an additional 1 percent reduction in tax rate for first-year teachers and all police officers. Let me be the first to say it, though others will fear doing so: It is neither fair nor smart for the state to decree certain occupations worth more than others. Much as we value police officers, giving them a sweeping preferential tax rate ignores, for example, that there are more dangerous professions. If they deserve extra consideration — and many do — the place to do it is in pay schedules, not using it as a flag-waving gimmick to pass a tax cut.

There's a bigger problem than inequities. For the first three months of this budget year, the state has no surplus, with revenue falling behind projections. That would suggest, absent some future growth, that Hester's tax cut would have to be paid by a reduction in spending. The $885,000 he'd like to take away from the football stadium in Little Rock would be only a small start. A likely casualty would be the $20 million recommended for additional special education spending so as to meet demand for those services. Hester hungers to reduce Medicaid spending, too. If he's ever successful in killing the Obamacare Medicaid expansion entirely, well, Hello Kansas! if combined with an income tax cut.

Hester isn't worried:

“I am ever optimistic about the future of our great state,” Hester said. “I am also optimistic that our state’s fiscal outlook will start to show significant positive growth in the coming months.”“With this optimism in mind, I am proposing income tax reductions that will benefit working Arkansans in every level of income,” Hester said.

If hester is successful in expanding the anti-LGBT legislation he's already passed in Arkansas — a religious pretext protection of discrimination and a bar on local non-discrimination ordinances — his idea of growth might not include some of the forward-thinking companies that have shunned North Carolina for its similar legislation.

Hester said his idea would benefit 577,000 taxpayers. 

He provides a chart estimating the savings by tax bracket:

* Less than $21,000:  $32.7 million in tax cuts for 67,000 taxpayers, or about $488 each.

* $21,000 to $49,999: $12.7 million in tax cuts for 187,000 taxpayers, or about $67 each.

* $50,100 to $75,000: $22.8 million in tax cuts for 152,400 taxpayers, or about $149 each.

* Above $75,000: $37.6 million for 170,600 taxpayers, or about $220 each.

He puts the cumulative cuts at $105.8 million for 577,000.

I presume his source is Department of Finance and Administration. I've requested an update on the department's figures on taxes paid at every income level in the most recent tax year to double check.

Republican leaders of the House and Senate have been cautious about Gov. Asa Hutchinson's expressed desire for still more tax cuts, wanting to assess needs first. Already, the governor seems to be backing a tiny — less than 1 percent increase — in education spending. It's a category that already has failed to keep up with inflation and whose primary cost — employees — are suffering from calamitous insurance costs that the state and local school districts aren't covering.

Hester doesn't mention whether his idea is to capture the $70 million in Pulaski County desegregation money that is coming to an end. Current law requires that savings to allow the removal of the final unobligated state penny on the grocery tax.

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