State Rep. Charlie Collins, R-Fayetteville, and I are having a civil disagreement, not so much about whether to cut income taxes, but how and when.
Collins is a member of the state Republican House Caucus, which has proposed what it calls a SIMPLE plan. I’ll describe the plan in a future column when there is enough space to do the subject justice, but he’s the Republicans’ point person on the “I” – income and other tax reform.
Collins is arguing that Arkansas can and should cut income taxes now, and he’s proposing doing that by eliminating two of the state’s six tax brackets.
Basically, if you make a middle class living in Arkansas, you pay one of the state’s two highest rates – 6 percent if you earn $19,900 to $33,199; 7 percent if you make above that. Arkansas has four other rates, starting with 1 percent for those making up to $3,999 and 2.5 percent for those making higher than that up to $7,999.
Collins would get rid of the 2.5 percent rate so that everyone making up to $7,999 would pay 1 percent. He also would lop off the top rate so that everyone making $19,900 and above would pay 6 percent. And then he would raise that over time – he suggests $20,000 per year – so that only high earners eventually would pay the top rate while most Arkansans would pay the next highest rate, currently 4.5 percent.
Collins says the state can do this because it routinely collects more tax revenue than the year before but also spends more than the year before – more, in fact, than is necessary to keep up with inflation.
Instead, he says state government should stop growing and take less money from the taxpayers. Putting that money into the economy would make Arkansas more competitive with its neighboring states, all of which have lower income tax rates. It would create growth that in the long run would result in more tax revenues. And it should have been done long ago.
“The best time to generate the bigger economic growth would have been in the past,” he says. “The next best time is right now.”
So what’s the problem with that?
I tell him I worry that Arkansas legislators will cut taxes and not cut spending, just like legislators in Washington do. Arkansas balances its budget (more or less), but that could change quickly. Future generations already are burdened with a $16 trillion national debt. They shouldn’t have to bear a state debt, too.
In Arkansas, major expenses are looming, or at least possibly looming. As the baby boom generation ages and as health care costs rise, the state will spend much more on Medicaid, which provides medical care for the poor and disabled and pays for a lot of nursing home costs for other families. In fact, the state supposedly is looking at a $250 to $400 million shortfall in the fiscal year that starts July 1, 2013.
Meanwhile, Congress, unable to balance the federal budget, might turn its eyes westward across this country’s fruited plains and decide, “Hey, let’s just make the states pay for a lot of this!”
So, yes, by all means cut our taxes, but, unlike Congress, cut the spending first. And, also unlike Congress, save sufficient money to pay for the benefits we have (not always wisely) promised our aging population.
Collins does have answers for these concerns. He’s not convinced that Medicaid costs must rise so quickly. Steps can be taken to arrest that growth, just as legislators acted in 2011 to address a shortfall in the state’s unemployment insurance trust fund that some said would require a tax increase.
He’s willing to phase in his plan or adopt another to ensure that state government is adequately funded and the state budget is balanced. But, he says, you have to start somewhere.
“What I’ve just learned in life,” he says, “is it’s very difficult to talk about changing something, trying to improve something without having something specific for people to react to.”
I agree. Reaction, anyone?
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Steve Brawner is an independent journalist in Arkansas. His blog — Independent Arkansas — is linked at arkansasnews.com. His e-mail address is email@example.com