LITTLE ROCK — Democratic candidate for governor Mike Ross on Wednesday proposed $575 million in state income tax cuts that he said he would seek to implement gradually if elected.
“I am proposing that we modernize our state’s income tax code in a way that creates lower, fair taxes for working families and small businesses in Arkansas,” the former congressman and state legislator said in a news conference announcing his proposal.
Ross said his plan is more responsible than Republican gubernatorial candidate Asa Hutchinson’s proposal to cut state income taxes. Hutchinson said later that Ross’ plan is “not serious.”
Under Ross’ proposal, when fully implemented:
—The state’s top income tax bracket would start at $75,100 in annual income, instead of the current $34,000, and the tax rate for the top bracket would decrease from 7 percent to 6.9 percent.
—The second-highest bracket would start at $45,000 instead of $20,400 and the rate would drop from 6 percent to 5.9 percent.
—The third-highest bracket would start at $27,000 instead of $12,200 and the rate would drop from 4.5 percent to 4.4 percent.
—The fourth-highest bracket would start at $18,000 instead of $8,200 and the rate would drop from 3.5 percent to 3.4 percent.
—The fifth-highest bracket would start at $9,000 instead of $4,100 and the rate would drop from 2.5 percent to 2.4 percent.
—The rate for the lowest bracket would drop from 1 percent to 0.9 percent.
Ross said the state income tax code was created in 1971, at a time when few Arkansans earned more than $34,000 a year. Today, he said, one in three Arkansans is in the state’s top income tax bracket.
He said that with Act 328 of 1997 the state began tying income tax brackets to inflation, with a 3 percent cap on indexing, but the law did not make the change retroactive, so the brackets “never caught up.” His plan is based on adjusting the brackets to where they would be if Act 328 had been retroactive, he said.
Ross estimated that under his plan people earning $75,000 or more a year would save $1,148 a year in taxes, people earning $50,000 would save $880, people earning $40,000 would save $665 and people earning $30,000 would save $465.
“My income tax plan will be gradually implemented as the state experiences revenue growth so we can maintain our state’s balanced budget and protect important state services like education, Medicaid and public safety,” he said.
Ross earlier proposed phasing out the state sales tax on manufacturers’ equipment, as revenues allow, at a $40 million annual cost to the state.
Hutchinson, a former congressman and official in the George W. Bush administration, has proposed gradually cutting income taxes for all Arkansans. He has said he would start by lowering the state income tax rate for people earning between $34,000 and $75,000 a year from 7 percent to 6 percent and lowering the rate for people earning between $20,400 and $34,000 a year from 6 percent to 5 percent — cuts he estimated would cost $100 million a year.
“Promising $100 million in year one is fiscally irresponsible,” Ross said Wednesday of Hutchinson’s plan. “That’s pulling a number out of the air and trying to use a tax cut to buy votes.”
Hutchinson said in a statement Wednesday that Ross’ plan “is just not serious. It has no specifics or time-frame for action.”
“While my plan focuses on competitive tax rates in Arkansas for job creation, the Ross plan is not a long-term solution for economic growth,” Hutchinson said. “Under Mike Ross, Arkansas will continue to have the highest income tax rate in the region. This is a fundamental difference in our vision for growing Arkansas’s economy and creating jobs.”
Democratic candidate for lieutenant governor John Burkhalter issued a statement Wednesday endorsing Ross’ plan, which he said “brings fairness back to the tax code and cuts income taxes for those Arkansas families who need it most.”
Ross said his plan does not depend on the savings projected from the private option, the state’s program that uses federal Medicaid money to provide private insurance to low-income Arkansans, but he said he continues to support the private option and took a jab at Hutchinson for declining to take a position on whether it should be renewed.
“I can’t imagine anybody running for governor of Arkansas and not taking a position on the private option. It’s the most substantive policy discussion going on in Arkansas today,” he said.
Asked how he would pay for his tax cuts, Ross said he would do so over time with economic growth, as the state can afford it. A reporter noted that Ross previously criticized Hutchinson for not providing specific details on how he would pay for tax cuts.
“No, my specific criticism with Asa’s plan is that he has promised a $100 million tax cut in year one whether the state can afford it or not, which could jeopardize things like education, Medicaid and public safety,” Ross said.
In August, Ross said in a speech to the Political Animals Club, “(Asa Hutchinson) promised you he was going to cut the income tax, possibly eliminate the income tax. He didn’t say how much and he didn’t say how he was going to pay for it. I’m not going to stand here and tell you that I’m going to cut your taxes and not tell you how much and not tell you how I’m going to pay for it …”
Ross spokesman Brad Howard explained Wednesday that Ross was referring at the time to statements Hutchinson had made about cutting taxes without offering any details; he said Hutchinson later addressed those concerns when he unveiled his plan three months later.
Ross is currently the only announced Democratic candidate for governor. In addition to Hutchinson, Little Rock businessman Curtis Coleman and state Rep. Debra Hobbs, R-Rogers, are seeking the GOP nomination.