Collins: Let’s Turn Arkansas Into A Good Jobs Magnet

Rep. Charlie Collins is a freshman Republican from Fayetteville. He is currently facing re-election against Democratic challenger Adella Gray.  Collins is a graduate of the U.S. Naval Academy and a small business owner of Crown Partners Executive Search. He is one of the leaders on the issue of taxation in the GOP House Caucus and offers this guest post today on this timely topic.

Arkansans count on their elected officials to help improve the quality of life here, a worthy goal. Yet, numerous studies have concluded that we rank between 42nd and 48th among the 50 states on quality-of-life measures like median income (good jobs) and adult college graduates, while we rank near the top on negative measures like child poverty and teen pregnancy.

I have met thousands of Arkansans and can say with absolute confidence that we are just as good as the people in the other states, so we deserve better.

From 1997 through 2008, state spending across all categories grew 16 percent faster than the Arkansas economy, and to keep a balanced budget, taxes went up too. Using federal numbers, total Arkansas state tax revenue on everything from income to fishing licenses in 2011 was $2,634 per person, which ranked us 35th of 50. However, as a percentage of personal income, Arkansas had the ninth-highest taxation rate in the country! Even California and New York took a lower share of personal income than Arkansas.

Growing state government faster than the economy grows, while punishing workers with more taxes has not achieved the quality of life improvement goal.

So what needs to change?  The more you tax something, the less you get, and Arkansas taxes income—in other words, work— more than any state that borders us. It costs more to hire a worker in Arkansas than it does to hire a similar worker in a neighboring state. Common sens

e tells us labor costs help determine where employers add jobs, so Arkansans lose. Tax relief for workers will help turn our state into a Good Jobs Magnet.

Our top income-tax rate is 7 percent on earned income above $33,200. My plan would give all workers tax relief and simplify the system. We eliminate two of the six tax brackets—the 2.5 percent and 7 percent rates—which drops the new top rate to 6 percent. We then phase in higher income levels (six-figure earners) for the 6 percent rate over time.

The result is a dramatic tax break for low-income workers (60 percent reduction from 2.5 percent to 1 percent), strong relief for middle-class working families (35 percent cut from 7 percent to 4.5 percent), and a modest drop for high-income workers and job creators (14 percent from 7 percent to 6 percent).

Barack Obama’s former chief economic advisor, Christina Romer, studied tax laws enacted during the past 50 years and concluded that changing taxes by 1 percent could change output (gross domestic product) by 3 percent, sustained over several years. Tax relief for workers grows the economy by triple the amount of the tax reduction.

We can phase in tax relief at a pace that maintains state government spending, keeps the budget balanced, and funds other priorities such as eliminating the grocery sales tax and targeted spending increases. We do it by slowing the growth in state spending.

Turning Arkansas into a good jobs magnet will require more than just income-tax relief. Of course, excellence in education is critical to our future. We must lessen frivolous litigation, reduce wasteful regulation and improve innovation to accelerate long-term job creation. This new course will put Arkansans to work in good jobs and will generate more resources for essential government services than our current punishing tax rates on work.