NWA EDITORIAL | Arkansas lawmakers to ponder tax cuts in wake of historic surplus

Governor, lawmakers building a ‘consensus’

The Arkansas State Capitol Building is shown in this file photo.
The Arkansas State Capitol Building is shown in this file photo.

Politicians love little more in their public duties than a capacity to dole out money in a visible way. It might be handing a state of Arkansas check to the local volunteer fire department's chief for new equipment. It might involve basking in the applause as a ribbon is cut to open a new public facility the politician had a role in funding.

The money belongs to the taxpayers, but if the taxpayers aren't around to take credit, well, someone's got to do it, right?

It's true for Democrats and Republicans alike.

Don't get us wrong. Being an elected official at any level involves considerable work, a lot of headaches and usually a lot more blame than credit. So we hardly fault them for soaking up a little appreciation at the opening of a new trail or fire station.

In the realm of fiscal policy, candidates for public office are often described in one of two ways: They are tax-and-spenders or they want to cut taxes for the benefit of wealthy individuals and corporations.

You can decide for yourself which oversimplification you want to apply to which political party.

The ones who emphasize spending money on state programs and public agencies often are painted with the unflattering "tax-and-spend" label, as though that's not the very definition of what government does. Without revenue to fund public programs, government simply doesn't exist. While there are some critics who wouldn't mind that outcome, they're not serious thinkers.

Then there are people who argue for "limited" government. When they do, despite what their critics suggest, it's not to argue that government isn't necessary. It's more a question of how much government needs to do and to what extent government should tempt people to become reliant on its largesse.

Without a doubt, Arkansas needs roads, public health services, prison systems, environmental protection, good schools, state and local parks, quality higher education institutions and a host of programs and agencies that would simply be impossible without the capacity to tax. And, yes, spend.

Arkansas is in the midst of a discussion about taxation and spending because the coffers are overflowing. The Arkansas Department of Finance and Administration says state government, as it closed its fiscal 2022 on June 30, posted a $1.628 billion surplus.

"This represents the largest surplus in Arkansas history and demonstrates the state is collecting too much in tax revenue," Gov. Asa Hutchinson said.

Let the ticker tape fly and the balloons descend (does ticker tape still exist?). That's an impressive reflection that the state's economy is pumping along pretty well. Whether it says, as the governor suggests, that the state is collecting too much in taxes is debatable.

And debated it shall be, sort of. The governor plans to call lawmakers into a special session in August, primarily to continue Arkansas' downward push on income tax rates. As is the executive's tradition of late, the governor has been gauging "consensus" in discussions with legislative leaders. In other words, governors don't want to risk calling lawmakers to Little Rock at the risk of a failure in passing what the governor wants.

That's why Hutchinson, who previously had promoted a statewide teacher pay raise to help get the state's minimum teacher salary higher than $34,900, bailed on that pursuit. It's set to rise already to $36,000, although its' doubtful that's enough to be competitive in today's market. But lawmakers apparently eager to cut income taxes were less enthusiastic about shoring up the state's public education.

Heaven forbid the debate happen out in public. This whole consensus thing allows lawmakers to nix plans without once having a public discussion. So, teachers, you're just out of luck, even though nary a public vote has been cast.

But lawmakers are eager to cut taxes, and Arkansans, generally speaking, will get some benefit. But if the devil is in the details, maybe there's a reason it's so danged hot in our state right now.

The governor and the consensus he's got in his suitcoat pocket says cut the income tax, which naturally means people with larger incomes get a big portion of the benefit. Poorer folks? Well, they'd benefit a whole lot more from a reduction in the state's sales tax, which takes a bigger chunk of their wages than what richer people have to spend. If one person has $500 in savings and another has $10,000 in the bank, both of them pay the same tax on a loaf of bread or on a washing machine, but it's much more of a burden on the one with less money.

Since the budget surplus is a one-time pot of money, the state could also try what California (with its historic $97 billion budget surplus), Georgia, Maine and a few other states are doing. The Golden State and others will mail out rebate checks to millions of the states' residents. With the price of living in these inflationary times, wouldn't Arkansans appreciate a check in the mail?

The state clearly has room to return something to taxpayers, but let's also hope lawmakers don't get too eager. Last we checked, Arkansas ranked poorly in far too many categories -- health care, education, child development, etc. Budget surpluses can mean the state is collecting too much in taxes, but they can also mean the state isn't spending what's necessary to address some of the problems that exist within its borders. We think that's a realistic assessment in Arkansas.

We appreciate fiscal conservatism, but too much of good thing can do harm when it comes to economic policies and the condition of the state. Lawmakers may feel giddy about cutting the state's revenue and "giving it back to the people," but other states have been known to get carried away. Especially by focusing on the income tax, lawmakers will mostly bolster the bank accounts of people who aren't hurt by current tax rates. A sales tax reduction would help more people who need it. But the state also shouldn't further starve its programs, which are seeing prices climb just like everyone else.

It's a shame lawmakers aren't seeing their way clear to bolster teacher pay and help shore up the state's public education.

The debate, such as it will be, is set to begin in August. Chances are everyone will know exactly what's going to come of all this before the state's lawmakers even arrive at the state Capitol. But lawmakers should keep in mind there's more than one way to "give it back" to taxpayers.

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What’s the point?

As the state embraces its historic surplus, lawmakers should consider there are many ways to provide relief for taxpayers.


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