Tax cuts top schools, GOP’s Coleman says

Governor hopeful’s plan lops billions

Republican gubernatorial candidate Curtis Coleman on Wednesday proposed what he estimated to be about $2.4 billion in tax cuts over an eight-year period, saying he wants tax cuts to replace public schools as the state’s top budget priority.

The Little Rock businessman unveiled a wide-ranging plan to, among other things, cut the state’s individual income taxes by at least 20 percent, exempt some businesses from the state’s corporate income tax, eliminate capital-gains taxes, exempt military retirees’ benefits from the state’s individual income tax, and prevent the state budget from growing faster than the state’s gross domestic product.

“Let’s make reducing the tax burden on Arkansas taxpayers our No. 1 objective,” Coleman said at a news conference at his campaign headquarters in North Little Rock. “Let’s do that first and let’s put everything in order behind that objective.”

He said he wants to change the state’s top priority from funding an adequate education for the state’s public school students to granting tax cuts.

“I don’t support the presumption that if we reduce taxes it means we have to cut education. I think we have alot of other opportunities and a lot of other options,” Coleman said.

Another Republican gubernatorial candidate, Asa Hutchinson of Rogers, has proposed cutting state income taxes for individuals by about $100 million during his first year in office with further reductions in the future. Democratic gubernatorial candidate Mike Ross of Little Rock has proposed phasing in state individual income tax cuts that he estimated ultimately would reduce state tax revenue by about $575 million a year.

In response to Coleman’s tax cut plans, Hutchinson said in a written statement that, “Of course, we must first meet our obligation for a quality education.

“I have offered a concrete and detailed income tax reduction plan that will lower taxes on middle-income families first without affecting our commitment to a quality education for our kids,” said Hutchinson, a former 3rd District U.S. congressman and former federal homeland security undersecretary.

A spokesman for Ross, a former 4th District U.S. congressman and a former state senator, declined to comment Wednesday about Coleman’s tax-cut plans. Democratic gubernatorial candidate Lynette Bryant, who has been a substitute teacher, could not be reached for comment by telephone Wednesday afternoon.

As governor, Coleman said he would propose legislation to put Arkansas government on an eight-year schedule for annual individual state income tax cuts financed from increased state tax revenue. If tax revenue doesn’t climb sufficiently, Coleman said he’d pay for the cuts by reducing the annual operating budgets of state agencies.

He said he’s not proposing cuts in any particular part of state government, but wants to ask state department heads to reduce their budgets by 1 percent during his first year as governor and allow him to evaluate each agency for cost savings.

The state’s current income tax brackets are 1 percent for income up to $4,199, 2.5 percent for $4,200 to $8,299, 3.5 percent for $8,300 to $12,399, 4.5 percent for $12,400 to $20,699, 6 percent for $20,700 to $34,599, and 7 percent for $34,600 and above, said John Theis, an assistant revenue commissioner for the state.

Coleman’s 11-page “Let Arkansas Prosper” plan calls for annual cuts in the rate of individual income taxes to 2.43 percent for less than $9,999 in income; 4.38 percent for $10,000 to $19,999; 5.85 percent for $20,000 to $49,999; and 6.82 percent for more than $50,000 in 2016. The rates would eventually drop to 1.18 percent for less than $9,999; 3.19 percent for $10,000 to $19,999; 4.66 percent for $20,000 to $49,999; and 5.53 percent for more than $50,000 in 2023.

Coleman estimated that the first year of his individual income tax cuts would reduce state tax revenue by about $65 million in 2016. He said the individual income tax cuts that he’s proposing ultimately would reduce state tax revenue by $2.3 billion over an eight year period.

After his news conference, Coleman said he subsequently learned that his plan would increase income taxes in the lowest income tax bracket and “we are definitely going to fix it.

“We are not going to tolerate a tax increase on any bracket,” he said.

Earlier, Coleman told reporters that he wants to eliminate corporate income taxes on any small businesses with a net taxable income of less than $1 million to create a magnet for small businesses in Arkansas. He estimated that would reduce state tax revenue by about $24 million a year.

He also proposed completely eliminating capital gains taxes as the most effective way for “increasing the availability of essential seed capital for small businesses in Arkansas.” He estimated that would reduce state tax revenue about $45 million a year.

To attract working-age military retirees, he said, Arkansas should exempt all of military retired pay and survivor benefit plan payments from state income taxes. He estimated that would reduce state tax revenue by $14 million a year.

Coleman said he’s proposing that each county where the median household income falls below the statewide median be designated a tax-free enterprise zone in which new businesses may start up or move in from out of state and pay no state corporate income taxes for their first 10 years as long as the new businesses don’t compete with a similar enterprise in the tax-free enterprise zone region.

He’s also proposing creating tax credits for qualifying businesses moving into depressed communities if they buy supplies or create jobs there.

Coleman said the tax credits and tax-free enterprise zones shouldn’t cost the state anything because “it goes to attract new businesses that don’t currently exist, so it is income that the state doesn’t have today.”

Arkansas, Pages 9 on 03/27/2014

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