New Tax/No Relief For Taxpayers

The Fayetteville Shale (which is actually spread over a number of North Arkansas counties) has the potential to be an incredible economic bonanza to our state. This could be a Godsend for many families in Arkansas in desperate economic conditions as a result of  $4.00 gas on the horizon; food prices escalating daily on basics like milk, bread, eggs, and flour; the housing foreclosures; and the ominous economic problems facing our country.   But instead, Governor Beebe and 75% of the legislators are ignoring the citizens' desperate need for tax relief and plan to raise another tax to use the money for roads.  It just doesn't seem right that a Governor should be able to get this type of commitment from legislators before the bill is ever written and publicized so the people could voice their opinions on it. 

Our combined income and sales tax burden is one of the highest in the nation as a percentage of income.   Roads are important, but people need food before roads.  Besides a U of A study indicates that the benefits of an expanding gas industry will generate an additional $1.8 BILLION tax dollars over the next five years, which could be used for roads.  See the well-thought-out  article below by Mark Moore on this issue.  Below that see bulleted items on taxes in Arkansas.

Mike Beebe vs. Your Family Budget

Families are hurting in Arkansas, but our state government is sitting on piles of extra money- this year alone they have collected $127 million more than they estimated they would. In addition, the natural gas industry is about to take off in the natural state, and it is bringing more jobs and more dollars and more economic activity with it. A U of A study indicates that an expanding gas industry will generate an additional $1.8 BILLION tax dollars for state government over the next five years, even without a tax rate increase.

State government is raking in money left and right, and the future looks even better for them. Increased economic activity from the coming natural gas boom will mean increased fuel tax revenues, increased sales tax revenues, increased income tax revenues, and increased property tax revenues (to the tune of $1.8 billion more over then next five years, even if they don't raise any tax rates). That is a lot of money for schools and roads and everybody else in the state with their hand out. Still, it does not appear to be enough for Governor Mike Beebe and the Arkansas legislature. They are about to call a special session to do what? RAISE TAXES!

That is right, they want to enact a severance tax of up to five percent on revenues from natural gas drilling. Once it gets rolling, this increase should send an additional $100 million a year into the already bulging coffers of the state government. Heck, with inflation in energy prices, it could wind up being a lot more than $100 million a year.

So with all of that bonanza of dollars flowing in, how much of it does Governor Mike Beebe and your Arkansas legislature want to share with you? Why actually, none. They want to spend it all themselves without giving a single penny of tax relief to any Arkansas family. They say they need the money for "roads" without giving any specific guarantees of which road is to be built. So, 100% for state government, 0% for tax relief to Arkansas families.

Their grossly imbalanced allocation of this bonanza begs for the question, "who is hurting more, the Arkansas Government or Arkansas Families?" Well Arkansas government revenues are $127 million over the expected increase. The state government planned on getting more money this year, but it is actually raking in a $127 million larger increase than they thought they would get. With the coming severance tax increase, Beebe and company are likely to grab an extra $100 million per year on top of that. Additionally, the expansion of the natural gas industry in the state has them looking at an almost two billion dollar windfall of extra tax revenues over the next five years even if they don't raise any taxes. So how is your family doing? It is my contention that our families need it more than our roads. Arkansas families need tax relief more than Arkansas government needs more revenues.

New roads don't mean much to a family who can't afford gas to travel on those roads.

It is my contention that 100% of the revenues from this tax rate increase should be returned to taxpayers in the form of tax relief for Arkansas families. Lots of politicians will tell you they are "conservative". Here is a good test for them- Any proposition to keep this windfall into the fat hands of the ever-increasing government is not "fiscally conservative". "Fiscally conservative" is reducing the amount of money that the government spends and increasing the amount that is retained by those who earned it. Any politician who tells you otherwise is lying to your face (and perhaps to themselves if they actually believe it).

Arkansans are over taxed. While it is true that our income tax burden alone is middle-of-the pack, our combined income and sales tax burden is one of the highest in the nation as a percentage of income. And our personal exemption (actually a mere $22 tax credit) is among the worst in the country. Only five states have punier exemptions/credits on income tax than Arkansas does, and each of those five has a lower income tax for a family of four making $40,000 a year.

Our state income tax exemption/credit situation is perhaps the worst in the nation, yet here is our legislature with $127 million more than they thought they would have, and about to come together to rake in an estimated $100 million more, yet they do nothing, nothing, to fix our lame state income tax exemption/credit situation.

Governor Beebe attempts to deflect from this rapaciousness by mentioning that he has cut the sales tax for groceries in half. Yes, after starting with the largest budget surplus in state history he let Arkansas families keep about 10% of the overage. He was under great pressure to do so because he was running against a fellow who proposed eliminating it all. Mike Beebe proposed eliminating half now and half later "when the budget permits it". If the budget ever permitted it, now would be the time. If not now, when? If there was ever a time that families needed tax relief, now would be the time.

Bear in mind that eliminating the grocery tax was something he committed (though to be fair did not promise) to do BEFORE this upcoming gas tax windfall. The treasury is overflowing with revenues and we have a windfall coming. Why is the Governor calling a special session to raise taxes instead of calling for one to finish the job on his commitment to eliminate the sales tax on food? Why is he calling a special session to add to the state's hoard of taxpayer monies instead of calling a special session to make our personal income tax exemption comparable with other states? They use the fact that our gas severance tax is lower than other states as an excuse to raise taxes, but they don't seem to notice that our personal income exemptions are lower than other states too! If we are keeping up with the Joneses then raise our severance tax to the national average and raise our income tax personal exemptions to the national average too! But it does not seem to be about logical consistency down there, it seems to be about separating us from our earnings.

I would urge ever legislator who cares about Arkansas families to vote against any tax rate increase unless it is at least offset by tax cuts. Families are hurting.

posted by Mark Moore (Moderator) at Thursday, March 20, 2008 4 comments links to this post

at this link:  http://arkansaswatch.blogspot.com/2008/03/mike-beebe-vs-your-family-budget.html#links

 

Tax Situation in Arkansas

 

 Debbie Pelley