EDITORIALS>>Straight talk from Beebe
The governor was addressing some 100 northwest Arkansas businessmen last Wednesday in Springdale, a gathering of power and money, including more than one Fortune 400 tycoon. John Tyson, chairman of Tyson Foods, wanted to know when Beebe was going to lower state income taxes, which he thought slowed business growth. Arkansas has to compete with states that either have no personal income tax like Texas or have lower marginal rates, Tyson observed.
Straight talk on taxes is not in vogue nowadays, as anyone who has watched the Republican presidential debates and smaller cattle shows around the country knows. Mention of any tax draws a promise from every candidate to cut it or get rid of it altogether. Every candidate boasts of his tax-cutting history, even Mike Huckabee, who raised more taxes than any governor in Arkansas history. Huckabee promises to get rid of income taxes altogether and impose a European-style sales tax that would shift taxes dramatically from rich people like Tyson to working people. “I’m not going to lie to you,” Beebe replied. “I don’t know where we’d go without the income tax.”
He said there might be small revisions in the tax in the next few years, but they should expect no major reduction in tax rates. This year, the legislature and Beebe eliminated personal income taxes on very low-wage workers and reduced them for families with incomes not far above the poverty line. They also cut the sales taxes on groceries in half.
Beebe spelled out the clear reasons why it could not be done. People are demanding better services — improved education, highways and health care — and flattening the income tax would impair the state’s ability to meet even the present level of services. Corporate and personal income taxes supply about 40 percent of the state’s general revenues, the central pool of support for schools and colleges, law enforcement and health services. Arkansas property taxes are among the lowest in the United States and people hate even those, Beebe said. So people will not stand for the tax burden to be shifted from income to property, and neither will they stand for a hike in the sales tax, which is among the highest in the region.
The governor might have added, but didn’t, that men in Tyson’s income group — the top 10th of 1 percent of Americans — have done very well in recent years. Congress radically lowered their income tax rates, excused them from paying much tax on their stock earnings and dividends and eliminated both the federal and state-level taxes on vast inheritances. Eight years ago, the Arkansas legislature also slashed the taxes they pay on long-term capital gains.
The Arkansas personal income tax, which has a top marginal rate of 7 percent, and the corporate tax rate of 6 percent are not really so burdensome when you consider that the taxes are deductible on federal returns, which means that Uncle Sam pays much of the state tax for them, and that both the federal and state codes are generous with deductions and credits for corporations and people with large investment earnings.
Beebe’s blunt talk ought not to be news since his point was self-obvious, but it passes nowadays for unusual courage. We found it refreshing.