Favorite

Asa Hutchinson follows Arkansas tax cut tradition 

click to enlarge asainauguration.jpg

Brian Chilson

You can count this as a defense of Gov. Asa Hutchinson or not, but he will repeat history rather than make it by engineering a tax cut right at the outset.

Tax cuts may look unwise in retrospect and maybe even in advance, but they are always popular at the moment and rarely are they held against a politician, even when they turn sour. As soon as he took office in 1981, Ronald Reagan persuaded Congress to pass a big tax cut, truly mammoth for high incomes, which was followed by skyrocketing national deficits and a recession that drove unemployment into double digits for 10 straight months. Reagan spent the rest of his presidency raising taxes — five of the 11 major tax hikes of the past 50 years were his — but 30 years later that tax cut is still celebrated as his legacy and the high-water mark of modern conservatism. The rest is forgotten.

George W. Bush was not as lucky, but his lengthening unpopularity owes more to two wars, two recessions and eight years of economic malaise than to the serial tax cuts for high earners that began his presidency, whatever they contributed to the cataclysms on his watch.

But this began as an Arkansas history lesson. We need not look at sister states where recent governors have started their reigns by cutting taxes, although Hutchinson has been warned about the experience of Kansas' Sam Brownback, who slashed taxes and promised a golden age four years ago only to preside over his state's fiscal collapse.

Hutchinson is cutting less than Brownback — a modest $100 million directed at middle-income earners — and promising less, although he predicts a spurt of growth when Arkansas's income tax rates become "competitive" and people rush here to take advantage. One benefit of tax cuts, at least when, like Hutchinson's, they are aimed at middle-income people is that they act as a stimulus, putting a little more money into the pockets of working people who will create demand for more production somewhere. The stimulus effect will be small because, owing to lower deductions, part of everyone's tax cut will just go to the IRS.

Hutchinson's two immediate predecessors, Mike Beebe and Mike Huckabee, began by cutting taxes. Beebe promised during his eight years to phase out all sales taxes on groceries, except the one for sportsmen that Huckabee installed safely in the Constitution. Beebe was able to do it without serious harm to the budget because President Obama's 2009 stimulus act and 2010 health law steered well over a billion dollars into the state treasury, forestalling harsh budget cuts and handing the governor little surpluses for five years.

When Huckabee claimed in his 2008 presidential campaign that he was the first Arkansas governor ever to cut taxes, it may have been the biggest fiction he ever uttered. Few Arkansas governors have failed to find some tax to cut. When he said he had to drive a recalcitrant Democratic legislature to cut taxes in his first months in 1997, Huckabee was off 180 degrees. Gov. Jim Guy Tucker drafted tax cuts benefiting middle-income and elderly taxpayers before handing the reins to Huckabee and every Democrat in the legislature signed Tucker's bill as sponsors. Huckabee signed it into law after his own plan, to mail people a small rebate, got no support even from Republicans.

You may remember that Huckabee then proceeded to raise more taxes than any governor in Arkansas history: every time in his eight-and-a-half years that there was a slight budget pinch. If you're keeping tabs: sales taxes three times, individual and corporate income taxes once, nursing-home-resident taxes once, motor-fuel taxes once, the corporate franchise tax once, tobacco taxes five times, alcohol taxes twice and driver's licenses once. Let's not count fee increases.

His tax record seems never to have hurt Huckabee in Arkansas — he still polls well in his native state — but it cost him fatally with big business, a key constituency of the national Republican Party. The Club for Growth slammed him again last week hours after he announced he was looking at the 2016 presidential race.

Let's skip all the other gubernatorial tax cutters except my favorite, Gov. J. Marion Futrell, who was elected in 1932 as the Depression and a historic drought was crushing Arkansas. Embracing the current Republican doctrine of cutting spending and taxes in hard times, Futrell quickly slashed spending by 51.6 percent and the taxes that supported it.

The state had shouldered the debt of road districts after the great flood of 1927 had destroyed more than a third of the state's roads, but Futrell and the legislature cut vehicle taxes, which paid for roadbuilding and the debt. Arkansas soon defaulted on its debt — the only state in the union to do so — and couldn't pay teachers or other school costs, or match any of the federal relief for the state's starving people. Bondholders sued the state and won. Futrell called the legislature into special session to raise gasoline taxes but also waived property taxes on the well-to-do who hadn't paid them.

Still, voters were happy with Futrell and re-elected him handily in 1934. But the Roosevelt administration had enough and announced that until Arkansas did something to help, Washington would no longer pay Arkansas teachers and other public employees or continue any of the relief that was keeping the desperate people of the state alive. Fearing riots, Futrell pleaded with legislators to raise taxes and they complied by levying the first sales tax (2 percent), legalizing liquor and racing and taxing them. Roosevelt turned the spigot back on and Futrell quit with his popularity high.

Whatever the convulsions from his tax cut, Gov. Hutchinson will fade the heat, too — if he persuades the legislature to avert catastrophe by keeping 250,000 Arkansans insured under Obamacare and the federal money flowing.

Favorite

From the ArkTimes store

Speaking of...

Comments

Subscribe to this thread:

Add a comment

More by Ernest Dumas

  • Klan's president

    Everything that Donald Trump does — make that everything that he says — is calculated to thrill his lustiest disciples. But he is discovering that what was brilliant for a politician is a miscalculation for a president, because it deepens the chasm between him and most Americans.
    • Aug 17, 2017
  • Happy at defeat

    After all the hydra heads of Trumpcare had been chopped off in one roll call after another, the Affordable Care Act and the health care system still lay in peril this week, subject to the whims of a vindictive president.
    • Aug 10, 2017
  • Ten days

    Last week confirmed what was already obvious. The Book of Proverbs was composed as either a primer or an omen for Donald Trump.
    • Aug 3, 2017
  • More »

Readers also liked…

  • No tax help for Trump

    The big conundrum is supposed to be why Donald Trump does so well among white working-class people, particularly men, who do not have a college education.
    • Aug 11, 2016
  • Dollars and degrees

    Governor Hutchinson says a high graduation rate (ours is about the lowest) and a larger quotient of college graduates in the population are critical to economic development. Every few months there is another, but old, key to unlocking growth.
    • Aug 25, 2016

Latest in Ernest Dumas

  • Klan's president

    Everything that Donald Trump does — make that everything that he says — is calculated to thrill his lustiest disciples. But he is discovering that what was brilliant for a politician is a miscalculation for a president, because it deepens the chasm between him and most Americans.
    • Aug 17, 2017
  • Happy at defeat

    After all the hydra heads of Trumpcare had been chopped off in one roll call after another, the Affordable Care Act and the health care system still lay in peril this week, subject to the whims of a vindictive president.
    • Aug 10, 2017
  • Ten days

    Last week confirmed what was already obvious. The Book of Proverbs was composed as either a primer or an omen for Donald Trump.
    • Aug 3, 2017
  • More »

Event Calendar

« »

August

S M T W T F S
  1 2 3 4 5
6 7 8 9 10 11 12
13 14 15 16 17 18 19
20 21 22 23 24 25 26
27 28 29 30 31  

Most Viewed

  • Charter secret

    These are hard times for those who believe in traditional public schools, run by democratically elected representatives, open to all on equal terms.
  • On Charlottesville

    Watching the Charlottesville spectacle from halfway across the country, I confess that my first instinct was to raillery. Vanilla ISIS, somebody called this mob of would-be Nazis. A parade of love-deprived nerds marching bravely out of their parents' basements carrying tiki torches from Home Depot.
  • Home is where the hatred is

    According to the Southern Poverty Law Center's "Hate Map," a chapter of the Christian American Knights of the Ku Klux Klan is headquartered in Hoxie, a small town in Lawrence County that also holds the distinction of being the first battleground of the segregationists in the fight to integrate Arkansas schools.
  • Klan's president

    Everything that Donald Trump does — make that everything that he says — is calculated to thrill his lustiest disciples. But he is discovering that what was brilliant for a politician is a miscalculation for a president, because it deepens the chasm between him and most Americans.

Most Recent Comments

  • Re: Charter secret

    • The problem with your logic is that it only focuses on benefitting poor kids by…

    • on August 17, 2017
  • Re: On Charlottesville

    • Others will find fault of course but, IMO, the above piece is one of the…

    • on August 16, 2017
 

© 2017 Arkansas Times | 201 East Markham, Suite 200, Little Rock, AR 72201
Powered by Foundation