Recent income tax cuts are taking a bite out of the funds that pay for our parks, bridges, schools and public safety. These funds are supposed to grow as the economy grows, and as need for more teachers, social workers and other public services increases. However, recent income tax cuts mean there will be more kids needing pre-K and more roads needing repair, but about the same amount of dollars available to pay for them.
Last month we took in slightly more general revenue than expected, but only because we had very low expectations for revenue growth to begin with (in fact, revenue was expected to be lower this year than last year). Beating a very low forecast is not winning, growing year-over-year is. So far this year, despite economic growth and continued recovery from the great recession, total general revenue growth was barely positive (only one percent higher than last year). October net available general revenue was only 0.8% above last year.
One percent growth is far from impressive. For reference, fiscal year 2012 was a typical year for revenue growth (post-recession and no major tax changes) and had a healthy 3.9 percent growth rate. Unsurprisingly, much of the slow growth comes from lower income tax revenue. Year-to-date individual income taxes are down a hefty 3.0 percent, a $28.6 million dollar loss compared to last year.
Tax cut proponents expect a dreamlike economic boon to recoup the costs of any lost revenues. If you take a look at any of the other states who have made recent major income tax cuts, or if you ask the majority of economists, you will find that tax cuts don’t lead to economic prosperity. What they do lead to is drained state bank accounts and underfunded programs. Arkansas needs a tax system that can keep up with our growing needs. If we reverse these tax cuts (that don’t do much to help most working families) we can have an Arkansas with cutting edge schools, social workers with reasonable case-loads, renovated state parks, and quality pre-K – all of which are the true conditions for a successful economy.