Tune in tomorrow at 8:30 a.m. to @CapitolViewAR where we discuss need for phase out of our income tax if we are going to compete. Leaders in MS & LA are looking to do the same. TX and TN have no income tax. Let’s decide on our North Star & work toward it! https://t.co/8Rcq7WsaB3
— Lt. Gov. Tim Griffin (@LtGovTimGriffin) November 21, 2020
Lt. Gov. Tim Griffin, trailing in early polling for the governor’s race in 2024 against Leslie Rutledge and Sarah Huckabee, has floated an idea that he seems to believe is sure to boost his chances — eliminating the state income tax.
First: Tax cuts have never been so politically popular as hard-core conservatives like to believe. Otherwise, why would poor Arkansas voters continue to increase their country-leading sales tax, which hits poor people the hardest? (You CAN understand why rich people like a sales tax over an income tax. A relative handful of the wealthy reap most of the benefits of income tax cuts.)
Anyway, Griffin went on a Sunday show today to talk about phasing out the state income tax. It would be disastrously damaging to a state already lagging in the sorts of infrastructure that attract outsiders. It has been proven elsewhere to be a bad idea. He’s also pitching disingenuously what I’d call his Son of Sam Tax Plan.
Doesn’t work? See Kansas where Gov. Sam Brownback’s slashing of the income tax was so damaging to public schools (which get about half of Arkansas state revenue currently) that the plan was repealed by a Republican legislature.
Individual and corporate income taxes currently produce about $3.8 billion of Arkansas’s $6.9 billion in general revenue. Phasing that out, unless replaced with other axes, would mean deep cuts for public schools, colleges, public safety and scores of other public endeavors. (Highway builders enjoy protection thanks to two new sales taxes and the increased fuel tax — and the overlords spend it drunkenly.)
Disingenuous? Griffin says Tennessee and Texas have no income tax. This is misleading enough for a few Pinocchios.
Texas? It has a much higher property tax, sixth highest in the country at a 1.8 percent effective rate, about three times the .63 effective rate in Arkansas, one of the lowest in the country. Texas gets $16 billion a year in oil and gas revenues. It reaps big money from excise taxes, which means imposing the state sales tax on rentals, leases and services not taxed in Arkansas. It’s quite a list.
Tennessee has an excise tax, at 6.5 percent, that most information compilers say is the same as an income tax for the businesses that pay it. It also has a franchise tax. It does not have a personal income tax on earned income but will phase out a long-standing tax on investment income in 2021. Will prosperity follow? That wasn’t the case in Kansas. Said the Center on Budget and Policy Priorities:
Kansas’ 4.2 percent private-sector job growth from December 2012 (the month before the tax cuts took effect) to May 2017 (the month before they were repealed) was lower than all of its neighbors except Oklahoma and less than half of the 9.4 percent job growth in the United States.
Likewise, the number of Kansas residents reporting income on their federal tax returns from a partnership or “S corporation” (two of the main types of businesses that the tax cuts exempted from income tax) grew by 4.1 percent between 2012 and 2015, well below the 5.4 percent growth for the United States and below all of Kansas’ neighbors except Missouri.
Moreover, Kansas revenues plunged, leading to cuts to education and other vital services and downgrades in the state’s bond rating. On June 6, 2017, the legislature terminated what Brownback had termed a “real live experiment” in supply-side tax policy, repealing the business profits exemption and moving income tax rates back toward where they had started.
Tennesse is the model for the future Griffin envisions. Two-thirds of its state revenue comes from the sales tax. Currently, the sales tax accounts for about a third of Arkansas’s income.
So why not just double the Arkansas sales tax to 13 percent to keep the schools open and State Police cars full of gas? The tens of millions of income tax cuts for the Stephenses, Tysons, Waltons, Murphys, Hunts and them will trickle down on the rest of us, right?
The offsetting sale tax increase would likely have to be higher because lobbyists for special interests would work to exempt their clients from taxation. Tax advertising, for example? The broadcasters and publishers, for the most part, would scream.
Hell, let’s just pass a 50 percent sales tax on rice, beans, collards, hog snouts, honey buns and Mountain Dews and be done with it.
Griffin’s Son of Sam Plan is, in short, a crock. But Arkansans can be good prospects for crockery sales.
PS: Realistically, Tim Griffin knows this is a crock. He just wants people to TALK about it and feel all warm and fuzzy towards him. Not actually do it and govern a state unable to deliver services its people need.
But whoever is elected, we WILL see more tax cuts for millionaires and continued resistance to a truly progressive income tax, where the tens of thousands of working poor get an earned income tax credit. (Noted: Tim Griffin’s early buck-raking for the governor’s race is an honor roll of the super-wealthy in Arkansas. See just his most recent quarterly report.
In Arkansas, we believe in taxing work not wealth.
UPDATE: More evidence that it’s just feel-good demagoguery was a statement Griffin issued Monday. He wants credit for something that may never happen, by his own admission.
Eliminating the income tax won’t be easy, and it won’t happen overnight. It could take 10 years or possibly even longer. How long it will take to achieve this goal will depend on a number of factors, including our rate of economic growth and our commitment to spending discipline and reform of state government. We must be responsible and do it in a way that protects funding for essential government services, especially for our most vulnerable citizens. But this goal should be our North Star – every tax-related decision in state government should be made through the prism of whether it moves us closer to or further away from this goal. I know from many conversations with both legislators and Arkansans from all corners of our state that they are ready for this bold idea.”
PPS: Searching for an illustration, I checked the satiric Billionaires for Bush page and I was happy to see this development, fitting for the Arkansas zeitgeist.