Leader Blues

Thursday, February 21, 2008

EDITORIAL >>Tale of two chairmen

Asa Hutchinson and Sheffield Nelson, who once shared the chairmanship of the Arkansas Republican Party and repeatedly frustrated ambitions for high office, re-emerged this winter from the shadows of history. We like the reincarnated Nelson better.

Nelson has driven the movement to reverse the state’s shameful legacy and finally collect a small recompense for the exploitation of an evaporating natural resource that has been virtually given away for 50 years. He proposes an initiated act that would impose a real severance tax on the natural gas produced from Arkansas soil. The tax receipts from gas shipments would match federal aid to repair and rebuild highways, roads and streets and to curtail tuition increases at state colleges and universities.

Hutchinson, true to his past, wants the big gas companies to keep all the money and maximize their profits. While he acknowledges the need for more money for highways, Hutchinson would take it from the schools, colleges and health care. Arkansas school children are better candidates in Hutchinson’s mind to shoulder the cost of highway maintenance than are the Texas and Oklahoma companies that pipe Arkansas gas to the Ohio River Valley and beyond.

Asa!, which was the logo of his 2006 race for governor, outlined his plan in an op-ed article in the Arkansas Democrat Gazette. Hutchinson has been reasserting his leadership of the party, which he led to massive defeats in the 2006 election. In recent missives to party leaders, he has called for intense recruitment of Republican candidates for elections in 2010. The party is pretty much surrendering in the 2008 election. Stymieing a severance tax and highway program will serve as adequate achievement for 2008.

Hutchinson misstates the case for a severance tax by raising fears that everyone’s utility bills would shoot up. But as Nelson pointed out as long ago as the 1970s when he was running the state’s largest gas utility, little of Arkansas’ severance tax would be passed on to Arkansas homeowners and businesses because of the configuration of the distribution system.

Most of the gas consumed by Arkansas homeowners comes from Texas, Oklahoma and Louisiana and the companies pass those states’ severance taxes on to us. The gas produced from the freshly developing Fayetteville shale play is being exported almost altogether to other states. If Chesapeake and Southwestern Energy, the largest producers, pass the tax on it will be to industries and homeowners in other states. Those companies are piping some 425 million cubic feet a day from the state.

Oh, but the owners of mineral rights will have to pay an eighth of the tax and it would be a crushing reduction in their windfalls, Hutchinson warned. The thousands of owners, many of them individuals, indeed would typically pay an eighth of the tax, but it would be a minuscule burden. Like the big energy companies, they deduct the taxes from their state and federal tax returns, which means the government would absorb much of the tax.

Hutchinson also raised the specter that Arkansas would raise taxes higher than the gas-producing states to the west. Nelson’s 7 percent would be the same as Oklahoma’s and less than Texas’. But Texas doesn’t have an income tax and Oklahoma’s is lower than Arkansas’, he said. Texas has a heavy franchise tax that taxes corporate income and capital, and Oklahoma’s tax is virtually identical to Arkansas’. Texas land and royalty owners pay a much higher property tax on resources than Arkansans do.

Arkansas badly needs a new source of taxes for highways and the rest of the transportation infrastructure, Hutchinson acknowledged. Like a good Bush Republican, he offered a pain-free way to do it. Since the state is rolling in surplus money, he said, the legislature should earmark sales taxes from the sale of automotive parts and services for the highways. That’s what he would do if he were governor. The schools would not miss $50 million to $75 million, he implies.

If Hutchinson kept up with fiscal developments, he would know that the surpluses disappeared after Gov. Beebe and the legislature halved the sales tax on groceries. Before the year is out, the state will be cutting allocations to education and other general services.

Let us be thankful again for the 2006 election verdict and be hopeful that the Republican Party hews to the progressive leadership of the Nelsons, not the Hutchinsons