Analysis: Hutchinson’s tax cut pitch a campaign preview
LITTLE ROCK, Ark. (AP) — It was billed as a State of the State address, but Gov. Asa Hutchinson’s speech to lawmakers last week felt more like a kick-off for his re-election bid and a preview of the Republican’s legislative agenda for a hoped-for second term.
Hutchinson used his address to lawmakers at the start of this year’s fiscal session to unveil his plan to push for a $180 million tax cut for the state’s top earners when the Legislature convenes in 2019.
It’s a proposal that’s likely to be the centerpiece of a re-election campaign in which the governor faces a longshot challenge in the May primary from a rival who’s trying to paint him as insufficiently conservative. It’s also likely to be used by Democrats who argue the proposal threatens to turn Arkansas into another state that would slash taxes at the expense of other needs.
“I just don’t want us to drop the ‘Ar’ from Arkansas and become Kansas,” Democratic Sen. Linda Chesterfield said.
Finance officials say Hutchinson’s proposal would cut taxes for 147,000 residents who make more than $75,000 a year. The Republican governor portrayed it as continuation of cuts he’s championed over the past three years that include a $100 million cut for middle-income earners in 2015 and a $50 million cut for low-income taxpayers last year.
“It is important to achieve this in order that we have continued success in job creation and economic growth,” Hutchinson told a joint session of the House and Senate
The proposal leaves plenty of unanswered questions. Mainly: How can the state afford that much of a cut? Democrats already complain that Hutchinson’s proposed budget for this year is building up a reserve fund at the expense of other needs.
“There’s angst among the membership, not just with the $180 million proposed tax cut, but with the priorities in the budget that continue to not be addressed to the point of seeing cuts,” Rep. Michael John Gray, who chairs the state Democratic Party, told reporters last week.
Hutchinson said he believed the state could afford the tax cut without threatening essential services. Options he and legislative leaders have mentioned for funding the tax cut include ending some tax exemptions, which could start fights with interest groups depending on which tax breaks are targeted. The governor has also said savings could be found through “transformations” in state government and growth in the state’s economy.
Though the tax cut isn’t on the agenda for this year’s session, the reception Hutchinson’s proposed $5.6 billion budget receives could indicate how much support it has among lawmakers. Hutchinson has proposed setting aside $48 million in state surplus money for a reserve fund that he says could be the foundation for some tax cuts, with the remainder of the surplus funds going toward highway needs.
The next big test, however, will be in the coming months as a legislative task force develops its own recommendations for overhauling the state’s tax code. The panel is looking at potential changes throughout the tax code, and there’s no guarantee Hutchinson’s plan will be the centerpiece of the task force recommendations.
“It gives us his vision, which is good, but we’re not going to gravitate and say that’s the centerpiece of what we’re doing,” said Republican Sen. Jim Hendren, who co-chairs the task force and is the governor’s nephew. “We’re going to continue what we’ve been doing, which is figuring out what makes the best policy, coming up with a plan for reform and figuring out which method of tax relief makes the most sense for Arkansas.”
Andrew DeMillo has covered Arkansas government and politics for The Associated Press since 2005. Follow him on Twitter at www.twitter.com/ademillo