Leader Blues

Wednesday, July 20, 2005

EDITORIAL>> The virtue of inaction on budget surplus

Deficits are orphans unclaimed even by the parents, but no one can avoid fondling a surplus. The state government ended the fiscal year with leftover cash of a little more than $100 million, about 2 percent of the state budget, and every day’s news brings more proposals for handling it.

Gov. Huckabee talked about a tax cut, but actually, if we divine his purposes accurately, he seemed to prefer doing nothing. For once, that familiar impulse of Mike Huckabee is exactly the right one. “Rainy day fund” is the popular phrase that he used, but it means hold on to the money and see when it comes in handy.

A few Republican lawmakers and pundits talk about calling the legislature into session and cutting taxes. One GOP legislator said the state should use the occasion to slash business taxes and make Arkansas a more attractive place for big corporations. That is the easy, popular and wrong thing to do.

Arkansas, like nearly every state in the union, and the federal government, has experienced unusually healthy revenue growth the past 18 months, owing mainly to the continuing housing boom, low interest rates, whopping corporate profits and solid stock profits. Like other narrow economic boomlets, it will not last.

Employment and wages are stagnant nearly four years after the last short and mild recession ended.

Cut taxes and the state will face a fiscal crisis in short order. The state will be back to raising taxes and cutting services. You will remember (actually, you probably don’t because most people hardly felt them) the tax cuts the legislature engineered at Gov. Huckabee’s behest in the late 1990s. They were followed in short order by an income surtax, increases in motor fuels taxes, several hikes in sales and use taxes and alcoholic beverage taxes.

Why lead the taxpayers through such artifices again? The governor and lawmakers could go home and claim to be tax cutters, not big spenders, but not many voters would fall for it. The experience of the past few years, in Arkansas and in Washington, D.C., is that tax cuts go to corporations and high-income people and the tax increases that follow settle on working families.

If we had to guess, Gov. Huckabee is thinking about the Arkansas Supreme Court. The attorney general is having to defend the governor and the legislature’s appropriation of only about one-twentieth of the money that they had concluded needed to be spent on school facilities to comply with the Supreme Court’s mandate and their refusal to allow one more dime the next school year on teacher salaries and equalization aid to schools — the heart of the constitutional issue before the court.

The attorney general now must stand before the Supreme Court masters and argue that the legislature and governor did all they could reasonably do to bring schools up to constitutional standards while more than $100 million has already been left on the table. His best argument this month may be that what the judges read in the paper was all just the lyin’ press — there is no surplus.

In a way, he would be right. The surplus is a mirage. Every dime of it, and much more, will be needed — and soon. Huckabee knows that.

Our neighbor, Sen. Tracy Steele of North Little Rock, proposed giving half the surplus (roughly $50 million) back to taxpayers in a rebate. It would be, we presume, a one-time check of a few dollars to those who file income tax returns. The poor, who earn too little to pay income taxes but pay plenty in consumption taxes, would get nothing.

Stick to your guns, governor. Do nothing.