John Burris: A Primer For Reforming The Tax Code

Conservatives in Arkansas have greatly advanced the cause of meaningful tax relief. Meaningful – in this case – are cuts that have the immediate effect of keeping more dollars out of government collections while simultaneously making the overall tax code more business and income friendly.

Both are important. It’s like filling up the car with gasoline but changing the oil too, not choosing one over the other. It’s short-term and long-term thought at the same time.

Progress should be appreciated, but not excuse inaction on something bigger now, when all of government is finally in Republican hands. Governor Asa Hutchinson has a chance to not waste this occasion, but he’ll need the help of others.

Context from the past helps underscore the great opportunity of now, and it can warn of the challenges that come with any tax reform effort.

2009 marks the last time our tax rates, on the net, increased. The tax on tobacco products was increased, an effort I opposed.

In 2011, Representative Ed Garner choked back tears after fighting for and winning the chance for a floor vote on his ten million dollar cut to the Capital Gains Tax. It passed out of the House, opposed by Governor Beebe and the Democratic leadership. Most knew it would likely fail in the Senate, but winning even the first round of a fight was new and worth celebrating.

That same year, as Minority Leader and a member of the Revenue and Tax Committee, I scuffled with Senate Republicans by tabling a cut in the Used-Car Sales Tax. The House wanted a Back-to-School Sales Tax Holiday passed in conjunction. Some Senators did not. Both eventually passed, a “grand bargain” totaling six million dollars in cuts.

By 2013, with Republican majorities being guided by tax reform’s spiritual leader, Rep. Charlie Collins, opportunity was seized. Big cuts, totaling around $150 million, or roughly 3% of the state budget, were achieved by reducing all income tax rates by equal percentages. These were meaningful cuts in the meaningful areas.

I sometimes tell old stories for pointless reasons. I’m not doing that now, at least not entirely. The seemingly small-ball of yesterday is gone, replaced with the bigger opportunities of today.

Republicans, though, can be our own worst enemy in achieving the things we campaign on achieving. In the fights of yesterday, it was often Republican against Republican. Views on tax reform vary, usually pitting corporate and special against general and broad.

Tax cuts also lead to smaller pots of money in General Improvement Funds (GIF). To again compare tax dollars to a car, GIF is nothing but a car wash. It feels good and looks good, but doesn’t change a thing, especially if you’re not changing your oil.

All of these competing interests make broad-based tax reform an uphill challenge. Gov. Hutchinson should meet it head on. It’s worthy of the effort.

His middle-class tax cut was a good start, partially because it left in place previous cuts, like lowering the highest marginal income tax rate from 7.0% to 6.9%.

There are at least two paths for future reform. One is head-down and simple, but meaningful. Just keep cutting, a fraction of a percent at a time. Thanks to Sen. Jon Woods and Rep. Warwick Sabin, potential consistency in Legislative leadership makes this a better bet than before.

The other is more complex. It’s the old conservative line about broadening bases and lowering rates. There are exemptions on the income side, but many more on the sales tax side. Our friends at Farm Bureau, the Chamber of Commerce, and other groups might have an opinion on this approach. It’s still worth exploring.

We’ll never have the beaches of Florida or the oil of Texas. But could we have the higher licensure fees of Tennessee in exchange for lower income tax rates? Could we tax online sales and lower income tax rates? Could we eliminate some exemptions and lower the income tax rate? The Grocery Tax cut and Capital Gains Tax cut are actually just exemptions from the standard policy, as are the Used Car Sales Tax cut and Back-to-School Sales Tax Holiday, all of which I voted for.

There are plenty of ways to slice the pie. We just have to decide what the priorities are. All sides should give, if for the greater good.

No path is easy. All take leadership to achieve. Cutting is good; I support it. But reforming is better. Even changing the oil won’t help if your transmission is busted.

Undoing years of liberal policy patchwork is the right goal. Mechanics are needed, not car washers.