by Conduit For Action
A petition drive has been announced to put a proposal on the ballot to end Arkansas’ individual income tax. Will the drive get off the ground or was it a political stunt?
If it does get on the ballot, will you be “for” or “against” eliminating the individual income tax?
Individual income tax puts Arkansans at a disadvantage
The burden of Arkansas’ income tax is one of the reasons our state has a hard time competing with other states. Look to our neighbors, Texas and Tennessee. Texas does not have an income tax. Tennessee does not tax individual income, except for a tax on interest and dividends, which means wages and salaries are not taxed.
Six states have no individual income tax: Alaska, Florida, South Dakota, Texas, Washington, and Wyoming. [i] And, as we said, Tennessee does not tax wages and salaries.
Governor Hutchinson and income taxes
Governor Asa Hutchinson brags on income tax cuts he has passed, but what he doesn’t tell you is – he has been offsetting the income tax cuts with more taxes and broadening what is covered by other taxes. The result has been state government reaching deeper into our pockets. Governor Hutchinson should be known as: “Governor (Give-&-Take-Away) Hutchinson.”
Governor Hutchinson plans to call a special session of the legislature later this year to cut income taxes some more. Hutchinson’s plan is to reduce ONLY the rate applying to the top income bracket, not all the brackets, and he ONLY wants to reduce the rate on the top bracket by 0.2% (from 5.9% to 5.7%). The plan is disappointing considering Arkansas has amassed the largest surplus of general revenues in history which is over a billion dollars.
It is not the limited scope of the tax relief that worries us. What worries us is the possibility ol’ Give-&-Take-Away might decide to trade income tax relief with increases in other taxes.
Petition drive to repeal the individual income tax
Arkansas’s Attorney General Leslie Rutledge says she wants to eliminate Arkansas’ income tax on individuals. Rutledge says she is organizing a petition drive to put the issue on the ballot at the next general election, which is November 2022.
Is Rutledge serious about eliminating the tax or was it merely an effort to get a headline for her campaign for Governor? Only time will tell as we watch to see how much progress is made before the primary election to get the petition drive up and running.
The sky is falling they say
Some say Arkansas government can’t run without taxing individual income. As proof, some cite an article saying the income tax on individuals brings in $3 billion a year and the state budget is only $6 million. [ii]
Three billion dollars is significant BUT if you think that means the elimination of the individual income tax would take away half the state budget then you have been misled.
The $6 billion number ONLY represents spending from general revenues. General revenues are only a small part of state spending. Here is what the whole Arkansas budget looked like based on expenditures in the 2019 fiscal year. According to the Bureau of Legislative Research when general revenue expenditures were added to other expenditures the state spent $25.7 billion.[iii]
- Trust & other Funds – 30% ($7.7 billion)
- Federal Funds – 30% ($7.8 billion)
- General Revenues – 22% ($5.5 billion)
- Special Revenues – 5% ($1.2 billion)
- Cash Funds –12% ($3.1 billion)
- State Central Services & Constitutional Officers Fund –1% ($0.3 billion)
Click chart to enlarge
Is there no fat in the state budget?
Bureaucrats and corporations getting state money as incentives and grants will tell you the state budget can’t be reduced and must be increased.
But remember Arkansas’ general revenue budget was slashed at the beginning of the Covid-19 pandemic because it looked like the pandemic shutdowns were going to ruin the economy and cause tax collections to plummet. Do you remember people going into the streets demanding more spending? Neither do we. Could it be that state agency budgets are so bloated the people didn’t notice?
AND DON’T FORGET ARKANSAS’ OVERALL TAXES ARE RANKED AS AMONG THE HIGHEST IN THE ENTIRE NATION.
Your opinion?
Are you “For” or “Against” eliminating Arkansas’ individual income tax? If you are for it, do you plan to sign a petition to put the proposal on the ballot?
We hope to get your thoughts on the Conduit For Action or Conduit News Facebook pages.
[i] https://taxfoundation.org/2021-state-business-tax-climate-index/
[ii] Rutledge wants ’22 vote on income tax, Arkansas Democrat-Gazette, July 26, 2021
[iii] Bureau of Legislative Research slide # 19 of https://www.arkleg.state.ar.us/Bureau/Document?type=pptx&source=blr%2FFiscal%2FPublications%2FA.++PowerPoints%2C+Fund+Types%2C+Important+Dates&filename=B.+2020+Financing+State+Programs (NOTE: this link is a download)
