Michael Wickline of the Arkansas Democrat-Gazette provided a thorough look Sunday at the Republican legislature’s headlong push to cut the top rate on the state income tax, beginning with a drop from 5.9 to 5.5 percent for the highest-income taxpayers.
Before this is done, I’d hope to see more discussion of winners and losers in this plan.
Obvious losers: State services — education, public safety, human services, prisons, pre-K education. (Exception for heads of state agencies, whose pay will continue their exponential rise.) This impact hurts those who need help most and who stand to get little or nothing from the latest round of tax cutting, as usual.
Certain winners: The wealthy. Yes the tax break would go to those making more than $82,000 (which could be up to $164,000 for working couples filing separately on the same form.)
But remember that the median household income in Arkansas is about $47,000. About 15 percent of Arkansas taxpayers make more than $82,000, but the bulk of the savings will go to the much smaller percentage who make significantly more money.
This plan will make the income tax even less progressive and even more favorable for the wealthy.
As noted below, the bulk of the windfall will go to people making more than $197,000. About 5 percent of Arkansans will be served. Will the poor and true middle income ($47,000) reap any benefit? How much will they suffer in services the state COULD but WON’T provide?
Cuts to the top tax rate mostly benefit 5% of Arkansans making over $197k. Instead, let’s invest in:
👨👦Helping low-wage workers afford child care
🥦Expanding nutrition assistance for families
📚Expanding scholarships to help more families afford collegehttps://t.co/cz9iPieknj
— Little Rock & Central AR (@IndivisibleLRCA) September 20, 2021
Consider the benefit found by Arkansas Advocates for Children and Families of a cut of the top rate from 5.9 to 5.8 percent. Multiply the benefits shown in this table by four for the proposal now floating. Such a tax cut might be worth $28 to someone making $70,000 but almost $4,000 to someone making about $1.5 million a year.
The Advocatrs’ report notes that study after study has found no correlation between tax cuts and economic development, though they can have a calamitous impact on state services. (See Kansas and Louisiana.) Ernie Dumas wrote about this recently.
But don’t tell the legislature. They don’t believe in masks or vaccinations and think racism is fiction, among other stellar thinking. Pass the Ivermectin, pappy.