Democratic gubernatorial candidate Mike Ross on Wednesday proposed overhauling the state’s income-tax brackets to provide what he called lower and fairer taxes for working families and small businesses.
The former 4th District congressman and state senator said he wants to gradually phase in changes that would ultimately reduce state tax revenue by about $575 million - more than half of the more than $1 billion cost of Democratic Gov. Mike Beebe’s 2006 plan to cut the state’s sales tax on groceries.
Ross of Little Rock said his proposal would be financed out of the growth in state tax revenue so the state can maintain a balanced budget and protect important state services like education, Medicaid and public safety. That’s the way Beebe has gradually cut the state’s sales tax on groceries from 6 percent to 1.5 percent since 2007, he added.
He declined to commit to a particular timetable for implementing his tax cuts if he’s elected governor. Beebe is barred from seeking re-election under the state’s term limits; his four-year term ends in January.
Ross said his goal would be to nearly or completely implement his tax-cut plans during the eight years that he hopes to serve as governor, but that would depend on the growth of state revenue.
“I don’t think we are going to see the kind of revenue growth and the kind of job creation that we want in this state until we bring fairness to the tax code,” Ross said during a news conference at the Doubletree Hotel in Little Rock.
Afterward, Republican gubernatorial candidate Asa Hutchinson of Rogers -who proposed an income-tax cut plan in November that he estimated would reduce state tax revenue by about $100 million a year in his first year as governor - said Ross’ tax cut plan “is just not serious” because it has “no specifics or time frame for action.”
During his news conference, Ross said the state’s top individual income-tax rate of 7 percent ranks 13th-highest among the states with individual income taxes, and “a single mom in Arkansas, who makes $34,000 a year, pays the same top rate as someone making $340,000 a year.”
Under Act 328 of 1997, the state started linking the brackets to inflation with a 3 percent cap for indexing, but it failed to make such changes retroactive to 1971, he said. Ross wants to change that, he said.
The Democratic candidate said his top income-tax bracket would start at $75,100 with a 6.9 percent rate instead of the current $34,000 a year with a 7 percent rate, causing 14 percent of taxpayers to be in the top bracket compared with 34 percent today.
When fully implemented, Ross’ plan would grant a tax cut of about $465 to people making $30,000 a year, $665 for people making $40,000 a year, $880 for people making $50,000 a year, and $1,148 for people making $75,000 or more, he said.
“We will do all this in a fiscally responsible way, because unlike my opponents, I will not bankrupt this state to win an election or make a campaign promise I cannot keep,” Ross said. He said the overhaul - along with his proposal to phase out the sales and use tax on partial replacements and repairs of machinery and equipment - will cut taxes for working families, small businesses and manufacturers that put people to work across the state.
In November, Hutchinson, a former 3rd District congressman and federal Homeland Security Department undersecretary, proposed state income-tax cuts that he estimated would reduce state revenue by about $100 million a year.
During his first year as governor in 2015, Hutchinson has said he would ask the Legislature to cut the state’s income-tax rate from 7 percent to 6 percent for people earning between $34,000 and $75,000 and from 6 percent to 5 percent on those earning between $20,400 and $34,000.
He has said his tax-cut proposal would be paid out of growth in tax revenue and surplus state funds, maintaining the state’s commitment to education without cutting state government spending. He has said his goal as governor would be to gradually reduce the state’s income-tax rates for all Arkansans, starting with the middle class, to create more jobs.
Ross said Wednesday that Hutchinson, who lost to Beebe for governor in 2006, “has promised a $100 million tax cut in Year One whether the state can afford it or not, which could jeopardize things like education and Medicaid and public safety.”
Unlike Ross, Hutchinson said in a written statement that he’s proposed “a serious plan to begin reductions of our income tax rates in Arkansas” with a specific timeline, and “this is a clear difference in leadership.”
“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.”
Republican gubernatorial candidate Curtis Coleman of Little Rock, a businessman, said in a written statement that Ross’ tax-cut plan “may be hollow promises” because Ross builds his proposed tax cut “on hoped-for increased revenue for the state and not a reduction in the size and growth of state government.” He said he’ll propose his own tax-cut plan next month.
Republican gubernatorial candidate Debra Hobbs of Rogers, a state representative, said in a written statement that she agrees that the state must update its tax code.
“My CARE Plan for the future of Arkansas requires strategic efforts to lower the income tax rate, promote fiscal responsibility, and allocate across the board cuts for all taxpayers,” she said. “My plan will reduce the number of tax brackets from six to no more than four, while increasing the earnings in each tax bracket.”
Arkansas, Pages 7 on 02/06/2014