New analysis: The governor’s revised income tax reduction plan is more expensive and more biased in favor of the rich. Light general benefits.


It’s time for an updated analysis of Arkansas Advocates for Children and Families of huge income tax cut Governor Hutchinson and the legislature are set to quickly approve in early December.

Surprise: It’s even more expensive than a plan analyzed earlier and even a bigger boon for the rich. According to Republican enlightenment, this will mean it’s an even greater economic boon to the state, despite the historic failure of the spillover economy in other states and in the US Congress. (See Trump’s zillionaire tax cut for a recent example.)

Fully implemented, the plan grants a 17% tax cut to the wealthiest Arkansans. It’s a lot of money if you are a Walton, Tyson, Hunt, Stephens or similar. It includes a credit of 15 cents per day for people earning less than minimum wage, but not a cent credit for those just above minimum wage.

The analysis notes:

… Its main feature would be to reduce the highest personal and corporate tax rates. This disproportionately benefits the rich, and the reduction in corporate income tax will be largely captured by out-of-state shareholders, meaning that the revenue will leave the state economy entirely. . This increases the risk that, rather than inducing economic growth, tax cuts actually reduce the state’s economy.

The Institution on Taxation and Economic Policy estimates that the plan would deliver 80% of the benefits of a corporate income tax cut to the top 20% by income and that most of the money would go owners of out-of-state businesses.

It’s bad, but corporate income tax is already a relatively small part of the state’s image thanks to accounting tricks and other help. Sales tax and personal income tax are higher. No change is envisioned in the punitive sales tax, which hits the poor hardest. But here’s how the benefits of the proposed personal income tax cut would be shaken (almost half of the top 5%):


Taken together, these changes to our personal income tax rates would cost more than $ 520 million and the richest 20% of Arkansas earners would get 73% of personal income tax cuts when fully implemented.

In return, the state’s economy could contract or grow by less than a tenth of a percent, depending on which legislative consultant you want to believe.

In 2018, consultants from the Arkansas Tax Reform and Relief Legislative Task Force showed that any tax cut would lead to “negative growth in output and employment,” because they correctly inferred that a tax cut of the state required a reduction in state spending. This negative impact on employment and production is due to the fact that government spending creates jobs and also induces economic growth. But even more recent analysis, which explicitly ignored the impact of the cuts on the state budget, claims little benefit. They projected that Arkansas’ “gross state product”, a measure of our economy, would grow by less than $ 1 billion over a decade. But the gross state product of Arkansas exceeds $ 100 billion each year. This induces economic growth of less than a tenth of a percent.

Lawmakers will laugh at this just as they laugh at those who insist that livestock dewormer is not a proven antidote to COVID-19. The windfall to the rich will pass as quickly as the food of a diarrheal pig. Don’t expect any discussion beyond faith-based assurances that the state can continue to support vital utilities at their already anemic levels after a half-billion dollar tax cut. (In fact, the analysis indicates that the total fully implemented cost will instead be $ 600 million, or 10% of the current general revenue budget.)

But fair is fair. The rich should get richer, right, because the poor just don’t work enough to get along.

Says the analysis:

In other words, the ITEP estimates that the average Arkansan in the top 1 percent – those earning $ 503,000 or more – would see their taxes go down by more than $ 10,000. The average Arkansan in the bottom 20% – those earning less than $ 22,000 – would see their taxes go down by less than $ 20.

And brought to this conclusion:

How far could that $ 600 million annually go if we instead made key investments to expand preschool and child care, improve infrastructure, improve access and quality of health care, and more? services to stimulate the state’s economy while helping children and families at the same time?

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