Arkansas Gov. Asa Hutchinson (R) announced a plan to expand tax relief to more taxpayers, as lawmakers begin work on the state government’s annual budget.
In November, Hutchinson announced his plan, relieving Arkansans’ tax burdens by $50 million, expanding on a $101 million tax cut passed in 2016.
Reducing Taxes and Spending
Jonathan Williams, vice president of the American Legislative Exchange Council’s Center for State Fiscal Reform, says lawmakers should consider reducing both taxes and government spending.
“Taxes and spending are two sides of the same fiscal coin,” Williams said. “When discussing tax changes, policymakers should always keep the budget side of the equation in mind. Since nearly all states have balanced budget requirements, spending needs to equal taxation. However, a tax cut as small as $50 million generally should not be much of a threat to the overall state budget, given the potential for budget savings elsewhere. For instance, North Carolina has reinvigorated its economy with a reported $2 billion in annual tax cuts, all while keeping a AAA credit rating.”
Williams says positive tax reform should include closing loopholes.
“Reducing the tax burden on hardworking taxpayers, as well as fixing the tax code, are both laudable goals of pro-growth tax reform,” said Williams. “Looking for ways to reduce loopholes and cronyism in the tax code is a great way to pay for additional tax-rate reductions as a part of a larger package.”
Different Paths, Same Goal
Greg Kaza, executive director of the Arkansas Policy Foundation, says lawmakers should work to reduce spending.
“Identifying efficiencies in state government and earmarking cost savings is another way to achieve fiscal policy goals,” Kaza said. “Potential efficiencies should be identified to reduce operational expenses in the areas of corrections, education, and health. An example is the privatization earlier this year of Arkansas’ in-home health [care].”
Kaza says lawmakers should work to make Arkansas more attractive to taxpayers.
“The goal should be reducing tax rates to the point where Arkansas is competitive versus regional and national averages.” Kaza said. “Arkansas legislators have enacted significant tax cuts in the last decade. These include the state grocery tax, capital gains tax, and income tax. The goal should be reducing tax rates in 2017 using cost savings from efficiencies.”