Governor plans talk on $50 million tax cut UPDATE | Arkansas Blog

Tuesday, December 13, 2016

Governor plans talk on $50 million tax cut UPDATE

Posted By on Tue, Dec 13, 2016 at 11:23 AM

Gov. Asa Hutchinson says he will outline his plan for a $50 million income tax cut at a news conference Tuesday.

Some of this is positioning. And wishful thinking, I might add.

Revenue growth this year hasn't been robust and Hutchinson has already committed expected general revenue growth to highway construction. He counts, too, on continuation of federal Obamacare money at the current level — a windfall that paid for the state's last couple of tax cuts. Republicans promised to kill this thing if they took control of the White House and Congress, didn't they?

Despite all this uncertainty, there are Republicans such as Sen. Bart Hester who's proposed still more — a $100 million income tax cut. So Hutchinson wants to drive the discussion.

One big question tomorrow is whether the Hutchinson plan will include something for working poor. The last income tax cut omitted any cut in their taxes, under the head-scratching theory that they somehow get plenty of government assistance already. There have been indications that Hutchinson might even get on board a plan originally pushed by Democrats for an earned income tax credit as a means to provide a tax break to working poor. It has proven value as an economic stimulus because it's instantly turned around in commercial transactions, many taxable.

But the recent Democratic scheme to take control of the House Revenue and Taxation Committee threw up a potential political obstacle. It wouldn't do for the Democrats to make it appear that THEY were responsible for a tax break. As it happened, Committee Chair Joe Jett departed the Democratic Party last week for the Republican Party, which left the committee split evenly by party, rather than an 11-member Democratic majority. And now a Republican likely will be in the chair, though Jett has said Speaker Jeremy Gillam made him no promises on that score.

PS: It would seem safe to conclude — wouldn't it? — that Jett was not a part of the committee-packing effort led by House Minority Leader Michael John Gray?

Because the idea has resistance from some important Republican legislative leaders, it will be interesting to see if the governor's plan includes a tax exemption for retired veterans' pensions. Apart from the debate on whether more tax breaks are wise at a time when revenue growth is uncertain and the rest of government is getting by, at best, with 1 percent increases to cover incremental rising expenses, it is  not good tax policy to give one class of taxpayer favored status. What about cops? Firefighters? Ambulance drivers? Teachers in the roughest, poorest schools? The veterans already get tangible benefits for their service, including the pensions.

Also, the value of the vets tax benefit as a population builder isn't likely great. But it is always politically expedient to do something for vets. Lt. Gov. Tim Griffin, believed to be prepared to take any potential Hutchinson misstep as a lever to run against Hutchinson in the 2018 primary, is pushing the tax cut in between lobbying for unknown clients in private life. That's precisely why he went nuts over the brief Democratic tax committee takeover (even knowing the rules allowed the super majority Republicans to eventually prevail, regardless.)

UPDATE: The indications are that working poor and veterans will be included in the Asa Hutchinson tax-cut plan, though it will take a two-year phase-in to reach all those affected.

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