Autumn leaves are falling, so the time nears for the next great experiment with the Critical Greed Theory of economics, which we are told will this time catapult Arkansas into the promised land of prosperity and happiness that has eluded it for two centuries. Governor Hutchinson promised to summon legislators to Little Rock this fall to slash income taxes for well-to-do citizens, bringing the rate on the richest folks down almost to the level it was before Hutchinson’s old nemesis, Dale Bumpers, raised it in 1971 from 5 to 7 percent.
The two leading Republican candidates to succeed Hutchinson, Sarah Huckabee Sanders and Leslie Rutledge, promise to go Asa one better and direct Republican lawmakers two years from now to totally eliminate income taxes, which currently amount to $4.3 billion a year. No one doubts that legislators will do it in a nanosecond — or the earliest that the rules allow.
That would cut Arkansas’s general services — which include schools, colleges, prisons, health care and law enforcement — almost in half, perhaps more if you consider that the reduced spending on health care, education and roads could also slacken the giant federal support for the Arkansas budget, which this year is $9.5 billion.
But never fear. Under Critical Greed Theory, rich people like the Waltons will be so thrilled about not paying income taxes to the state that they will go out and hire scads of people at good salaries, start new lines of products, put on more shifts or double their gardening crews. Even better than that, people from California, New York, New Jersey and maybe even Texas will flood into Arkansas to live so they can avoid sharing some of their wealth with the government for services like education, health care and prisons. So many people will spend so much of their new wealth on cars, clothes, food and travel that the existing state and local sales and excise taxes will fill government coffers so full of cash that the schools, colleges and other programs will be swimming in money.
It has never worked that way even once, but Critical Greed Theory says it ought to. It was tried famously twice on the federal level — in 1981 by President Ronald Reagan and in 2001-2003 by President George W. Bush — and it was followed both times by recessions and ballooning debt. But those cowards never went to the lengths that Arkansas Republicans are about to go. Sometimes you can see catastrophe far ahead — it was predicted correctly a few years ago in Kansas and Louisiana when their governors implemented the Greed Theory — but shouldn’t a great-sounding theory be applied and applied until it finally works?
Critical Greed Theory works this way: As people start making lots of money, they get more and more resentful of sharing any of it with the government for all its manifold services to people. Logically, the really hard-up people should be the resentful ones. Taxes — principally sales or excise taxes on everything they buy — take a much larger proportion of their incomes. Maybe the sunburned sons and daughters of toil actually do resent the small sums they pay in income taxes to the state, but they have no way of expressing it like the rich do, through campaign gifts and powerful groups like Americans for Prosperity, Club for Growth and scores of others that pump money into the campaigns of Republicans like Rutledge, Sanders and Tim Griffin.
Griffin was the first one to propose eliminating income taxes, before Sanders drove him out of the governor’s race and into the one for attorney general. Thus, today’s Republicans — from Hutchinson and the candidates to succeed him down to individual lawmakers like Trent Garner from my hometown of El Dorado — jumped on the income-tax-riddance bandwagon.
The Arkansas Democrat-Gazette’s editorial page consistently illustrates the logic of Critical Greed Theory. It editorializes endlessly that, besides slashing income taxes to make life more endurable, Arkansas just needs lots more people living here, and the best way to get them to come is to pass a law that says if they move to Arkansas they won’t have to pay any income taxes to support all those services that Arkansas offers, like education, highways, police, prisons and medical services. Of course, a few Arkansans would ask, Why in the world would we want such people to come here, or more of them?
Will you pardon a short history lesson? Our state has an exceptional record on Greed Theory. Arkansas in 1884 repudiated its debt, incurred when it tried to set up a couple of state banks soon after statehood. Then, at the depth of the Great Depression in 1933, although Arkansas had the lowest taxes and the highest debt among the 48 states and had sort of welched on repaying its massive debt for a second time, the new governor, Marion Futrell, slashed taxes even more. Alone among the states, Arkansas could not feed its starving people or pay teachers beyond IOUs or keep schools open. The federal government stepped in and did these things, until the frustrated Roosevelt administration announced it was halting federal aid to Arkansas on March 15, 1934. Fearing hungry mobs descending on the Capitol, Futrell pleaded with the legislature to raise taxes instantly. It did, introducing the first sales tax and also taxing liquor and horse racing.
The Democrat-Gazette and the other champions of repealing or reducing personal and corporate income taxes always point to prosperous Texas and Florida, which do not have personal income taxes. Texas furnishes a particularly good comparison. It has a corporate tax, by another name, but no individual income tax. Texas governments get huge sums from some of the highest property-tax rates in the land — many times the average Arkansas ad-valorem burden — and Texas also levies high sales and excise taxes. It also levies a tax on the extraction of minerals — notably oil and gas — that finances a big part of Texas’s services and that is several times even the paltry tax that Arkansas decided to levy a decade ago. Texas’s 7 percent severance tax, still far short of Alaska’s 35 percent, is passed on to oil and gas customers in other states, like us.
Most working Arkansans pay more of their income every year in sales and excise taxes than in income taxes, but sales taxes don’t show up on their pay stubs or their federal 1040 or Arkansas tax forms, so they hardly realize they are paying them. Repealing Arkansas’s sales and use taxes would be of greater benefit to the vast majority of Arkansans than repealing income taxes and would cost the state treasury only half as much, but it would be meaningless to those who measure their incomes by the millions. Those are the people for whom tax policy is made when today’s Republicans are running things.
It could be helpful to recall the modern introduction of Critical Greed Theory. Reagan was blown away by the doodling of a California business thinker who sketched a graph on an envelope — the legendary “Laffer Curve” — purporting to show that as federal income taxes were reduced on higher incomes the beneficiaries would go out and invest their new savings in new hires or new ventures that would ignite the economy so fast that government tax revenues would actually grow rather than recede. Like Donald Trump much later, Reagan was convinced that by cutting income taxes he could soon eliminate the federal budget deficit and shrink the national debt, which was then nearing one trillion dollars. George H. W. Bush called it “voodoo economics” but became Reagan’s running mate and, one supposes, a reluctant champion of Greed Theory. Congress passed Reagan’s big tax cut in his first months in office in 1981. Arkansas Senator Bumpers cast one of the few votes against it even while voting for federal spending reductions, and he had a tough time defending the tax vote five years later, when a young Republican prosecutor, Asa Hutchinson, took him on. The deepest recession since the 1930s — 10 months of double-digit unemployment — followed the Reagan tax cut. Starting the next year, Reagan and Congress raised taxes a little year by year. Still, by the time he left office the national debt had nearly tripled to close to $3 trillion.
In his first months in office in 1993, just as the country was emerging from the George H.W. Bush recession, President Bill Clinton spurned Critical Greed Theory and got Congress to pass a small tax package — without a single Republican vote in either house. Republicans predicted another Great Depression. Instead, the federal budget was balanced for the first time in 25 years and for a record four years in a row. The economy created 22 million new jobs, still a record for any comparable period in American history. It seemed to disprove Critical Greed Theory once and for all.
A further note about the big Reagan tax cut and Gov. Dale Bumpers’s vote: Back in 1971, after Bumpers had defeated Gov. Winthrop Rockefeller, he embraced Rockefeller’s first priority — to raise the state’s top income tax rate on Arkansas’s wealthiest, like himself, from 5 percent, where it had stood since 1929, to 12 percent to support Arkansas schools and health care, the weakest systems in the country. The legislature defeated both of Rockefeller’s attempts with only the tiny contingent of Republicans, joined in the Senate by only two Democrats, voting for his bills. Bumpers in 1971 lowered Rockefeller’s planned top rate from 12 to 7 percent and passed the bill. Despite Bumpers’s tax increase (he also raised cigarette and motor-fuel taxes) and contrary to Critical Greed Theory, the Arkansas economy had an instant burst of growth that added record numbers of new jobs — at least until the weird Nixon-Ford inflationary recession finally settled on Arkansas in 1975.
Hutchinson announced he wanted to cut Arkansas’s income taxes when he ran in 2014, and he and the legislature have tinkered with the rates to lower them a little for lots of people. This fall, or next spring, will be his last chance to get rid of Bumpers’s tax.
Lt. Gov. Griffin announced last year he was running for Asa’s job and promised to get rid of income taxes entirely, but he hedged a little, saying that he might phase them out over his eight years in office or perhaps a little longer. After Sarah Sanders ran Griffin out of the race, she and then Rutledge each said as governor they would abolish income taxes, then retreated a little and said they would spread the cuts out over a few years, maybe eight.
If tax cuts produce so much good, why not reap the fruits immediately? In eight or 10 years, lots of people would die without ever enjoying the bounty of wealth and rich new neighbors from New York and Montana.
Sanders’s passion for eliminating income taxes, or any taxes, could prove to be a little problematic. The endorsement of her old boss Donald Trump is her ace card, but she also may benefit from association with her daddy, Rev. Mike, Arkansas’s governor for more than 10 years and the governor who raised more taxes than any governor in Arkansas history: income taxes, sales taxes, motor-fuel taxes, tobacco taxes (even chewing tobacco!), corporate franchise taxes, taxes on nursing home beds (to benefit nursing home owners), driver’s license fees and all kinds of alcohol taxes. A few people may remember the day (the video is still around) that Huckabee went before a joint session of the legislature and pleaded with the lawmakers, mostly Democrats, to raise a bunch of taxes. He said he would happily sign any tax increase they could think of to help him fatten the budget. Running for president in 2008, Huckabee denied ever raising taxes. If either Pop or daughter want an accounting, we can enumerate them in detail and by act number here.
Perhaps tiring of paying stratospheric property taxes on his giant mansion on Florida’s Redneck Riviera and hoping to live in the income-tax-free utopia that his daughter plans for the Bear State, Mike has sold the massive parsonage and the great ocean view that was despoiled every night by the leavings of deviant beachgoers and returned to a more modest estate in Little Rock’s western suburbs.
So will Sarah claim the mantle of one of the most liberal governors in Arkansas history, her daddy, or of the biggest presidential failure in American history, Donald Trump? (Look up his economic numbers.)
Will she repudiate her daddy’s tax-and-spend and big-government philosophy (he enlarged the government workforce by 20%) and fully embrace Critical Greed Theory? Will the billionaires’ Club for Growth (Mike called them the “Club for Greed”) go after Sarah as it did “tax-and-spend” Mike in 2008 and instead embrace the incompetent Arkansas attorney general who they can be sure will govern as foolishly as she promises? Time will tell.
Forlorn Arkansas Democrats — are there any other kind? — might contemplate what happened to the nearby and solidly Republican states of Kansas and Louisiana, which fully embraced Critical Greed Theory. Governors Sam Brownback and Bobby Jindal, enormously popular at the beginning, set out to get their states out of the income-tax business in phases, as Griffin, Sanders and Rutledge propose. As educational institutions and other key services of the state neared collapse in six or seven years, citizens were ready to tar and feather both men. Brownback, a former U.S. senator, got Donald Trump to appoint him to the greatly sought-after office of ambassador-at-large for international religious freedom, resigned as governor and was never heard from again. Jindal, who had hoped his Greed Theory successes would make him president, was similarly chased out of office in Louisiana. In the next election, conservative voters in both states did the inconceivable in our time.
They elected Democratic governors.