Posted by Rich Huddleston on October 21st 2013
The changes to Arkansas's tax system passed during this year's legislative session fail to make the fundamental changes the state needs to create a fair, adequate, and modern tax system that will meet the vital needs of its citizens and boost the state's ability to compete economically.
According to a new report from Arkansas Advocates for Children and Families (AACF), tax changes passed during the 2013 session consisted largely of personal income tax cuts benefiting upper-income taxpayers and sales and use tax cuts targeted to specific industry groups. "A Better Foundation: Building a tax system that works for Arkansas families" makes the case that 2013 tax legislation did little to improve overall tax fairness for low- and middle-income families; resulted in flat or underfunding for certain critical services for children and families in the short term; and further undermined an already strained base for funding future services that are critical to the state's needs.
AACF Executive Director Rich Huddleston says a state's tax code is there to fulfill certain needs, like funding programs that are important to children.
"We need to prepare our kids for tomorrow's economy and one of the ways you do that is through education," Huddleston says. "You can't do that when programs like as pre-k, child welfare, and juvenile justice don't get the funding they need. The tax system is out of balance. Earners at the higher end are not bearing their fair share of the load. We should all pay for the things that are crucial to our shared prosperity, like health, education, and our infrastructure."
The report says that tax cuts passed during the 2013 session did nothing to improve tax fairness for low-income families. While the poorest 40 percent of taxpayers will see some benefits from the continued reduction in the grocery tax cut if and when it takes effect, they will see little, if any, benefit from the rate reductions in the personal income and capital gains taxes. The benefits of those tax cuts will go disproportionately to the state's wealthiest taxpayers. Already, the bottom 40 percent of taxpayers have a state and local tax burden (twelve percent of their income) that is twice that of the richest one percent (who pay only six percent of their incomes in state and local taxes).
"We need to revisit ways to shore up the adequacy of the revenue system to pay for investments in our children and things that will help grow our economy, like our infrastructure," Huddleston says. "That means we need to eliminate the preferential treatment of capital gains income, close corporate income tax loopholes, modernize the sales tax base to include services and online purchases, and enact a state EITC to provide relief for low-income workers."