Asa’s tax cut for the rich gets strong reaction and a familiar myth

A post last night on the Arkansas Times Facebook page about the gob-smacking favoritism shown the rich in Gov. Asa Hutchinson’s latest income tax plan drew a big and overwhelmingly negative review of his proposal.

I wasn’t surprised. As an analysis done for Arkansas Advocates for Children and Families showed, the top 1 percent of taxpayers (those making more than $456,000 a year) would reap 70 percent of the tax cut. And, the analysis showed, the tax cut is likely to reduce state revenue by more than $150 million, not the $97 million the governor cited based on estimates using 2016 data, rather than expected current data.

But … there was criticism of our criticism of the stick-the-poor income tax cut plan.

For example, one reader wrote in with a popular myth in such discussions:

Could it be that those folks paid 70% of the taxes to begin with?

Good question. Answer: No.

Let’s go to state figures for 2016. There were 1.178 million tax returns that year. Of those, 4,739 reported income of more than $500,000. Their total tax liability was $391 million. Total tax liability for all taxpayers was $2.48 billion. So the richest paid about 15.7 percent of all taxes.

Expand the pool a bit beyond the richest to all those making more than $250,000 in 2016.  There were 16,585 such taxpayers in 2016, or about 14 percent of all taxpayers. They owed $647 million in taxes, or about 26 percent of all taxes owed. Instead of giving them 70 percent of a tax cut, how about, if we must, give them only 26 percent of the tax cut and spread the rest around? Start with an earned income tax credit to benefit the working poor. Or spend it on schools, public safety, health care, highways and culture?

Could the governor at least offer some evidence that somebody in New Orleans or Austin or Nashville will move herself or her business to Arkansas for a 1-point drop in the top marginal income tax rate?

How many have moved here to take advantage of our tax-free capital gains scheme for whopper capital gains (more than $10 million). Might it be that such schemes merely making the existing fat cats fatter? They are the ones who finance political campaings and inaugural balls and the like after all.