Penalizing the poor … again

You must hand it to Gov. Asa Hutchinson. He has a vision and aims toward history in this legislative session.

He already was trying to reorganize state government and get the state’s top income-tax rate lowered to what he thinks will be a less-conspicuous level no longer likely to turn off business prospects.

Now he’s offered a bold, innovative and mostly pragmatic plan for highway funding that would keep the pavement spreading and the bridges rising. He would ask legislators to decide a part and voters to decide a part.

It would raise an estimated $300 million, establish sustaining revenue streams and nibble only on the current edges of general revenue. It would newly dedicate to highways two emerging general revenue sources—casinos and money generated from fees on alternative-energy cars—that are likely to grow in the long term, if not right away.

Education, teacher pay, human services, prisons … their existing revenue would be pretty much protected. They’d be harmed only in that these two new sources, if growing, would provide a bounty kept off-limits to them.

But budgets can be redone every year. If the day comes when everyone is driving an electric car to a casino, then we can cap the highway take and cut the schools back into the deal.

So the governor has stepped up with a plan that is substantial and doable. Voters would need to choose in November 2020 to continue permanently the existing half-cent sales tax they already approved. Legislators would have to show enough gumption to prime the pump, so to speak, by voting by a simple majority to raise immediately—and index for fractional annual increases according to costs— the gasoline and diesel fuel gallonage taxes at the wholesale level. And then we’d carve out those casino bucks and electric car bucks from general revenue.

If the casino money doesn’t pan out at forecast sums in the early years, the governor would use reserve funds. If it doesn’t pan out at all, there’d still be $250 million from the sales tax and wholesale motor fuel tax.

Since the plan is a pay-as-you-go program, not one to establish an essential revenue stream for bonded debt, then the Legislature would bear no obligation year-to-year to dip into general revenues for an appropriation to cover what the casinos were expected to raise but didn’t. The highway program simply could be scaled back to the two tax streams.

The main thing wrong is not with the plan itself, but with the broader context.

And that’s true only if you’re in the small group of antiquated believers in fair taxes based on progressive concepts of ability to pay.

A few liberals and Democratic legislators, in other words.

House Democratic legislators see the whole of Asa’s tax plan, from his income-tax cuts to his motor-fuel tax increase, for what it is—an unfair transfer of tax burden from the richest people to the working people.

The richest would reap millions in reduced income taxes. The working class would pay more per-gallon of gasoline to propel their pickups down the road to work. And they would be asked to vote themselves a half-cent sales tax if they wanted smoother, wider and safer pavement along the way.

Republicans say the fuel-tax proposal is a simple tax based on usage, thus fair. A more genuinely fair-minded point is that much of the use is required for work, which shouldn’t be penalized.

Asa’s envisioned Arkansas is one that will kick you off Medicaid for not having a job and then raise taxes on the gasoline you’ll need to get to a job if you find one.

In a news conference moments before Hutchinson’s announcement, the House Democratic Caucus detailed its objection and revealed its own plan.

The objection is that tax relief ought to be fair, and that it isn’t fair to let people making more than $456,000 a year keep $73.6 million more of their income taxes while asking the working man to pay more for gasoline; and that it also isn’t fair to reduce the general fund by $97 million through a top-rate income tax cut of which $73.6 million would go to the richest 1 percent, then turn around and raid another prospective $35 million from the general fund for highways.

So, Democrats unveiled a counterproposal by which the top-rate tax cut would be denied those making more than $456,000, saving $73.6 million for the general fund. Any other general-fund reduction would come not from diversion to highways, but in an earned-income tax credit for the working poor.

An earned-income tax credit gives the working poor tax offsets for money earned up to a certain low level. It once was a Reaganesque welfare-reform idea that more mean-spirited modern Republicans abandoned.

House Democrats most likely will accomplish nothing, though it bears mentioning that there are 24 of them and passing the governor’s income tax cut requires a three-fourths vote, meaning 75 of a hundred in the House.

If the Republicans have defections, Democrats would have leverage.

A smaller income-tax cut, a slightly smaller highway program and a little tax credit for the poor people whom Republicans blame for being poor— there’s a remotely conceivable scenario for that.

But Asa runs a pretty tight ship. It’s hard to imagine a Republican legislator denying him his vision toward transforming Arkansas into a place to which people with money will flock for a point-lower income-tax rate, smoother roads and hostility to poor people.