LITTLE ROCK — Among other issues in next year’s governor’s race, voters will be considering competing tax-cutting plans whose proponents, Republican and Democrat alike, cite Gov. Mike Beebe as their model.
Asa Hutchinson, widely seen as the Republican front-runner among the three announced GOP candidates for governor, unveiled a proposal Tuesday for cutting the state income tax. Mike Ross, currently the only announced Democrat in the race, has proposed cutting the state sale tax on manufacturers’ equipment and has said he will propose an income tax cut later in the campaign.
Both men say they want to phase in the cuts, following the lead of Beebe, who has led a successful push for gradually cutting the state sales tax on groceries during his tenure.
Hutchinson pledged Tuesday that if elected he will push for a tax cut for Arkansans earning between $20,400 and $75,000 a year. The cut would average $300 per person, he said.
Hutchinson estimated the annual cost of the tax break at about $100 million, though state finance officials said it was probably between $100 million and $150 million. He asserted that future revenue growth and budget surpluses would be sufficient to pay for the cut.
He also said he wants to cut income taxes for people earning over $75,000, but not right away.
"As the economy grows and surpluses increase, then we can gradually reduce the rates on higher-income individuals, but let’s start with the hard-working Arkansans who are in the middle class," Hutchinson told reporters.
Prior to last week, Hutchinson had been criticized by Ross for promising to cut taxes without offering details. After Hutchinson outlined his plan last week, Ross’ campaign said in a statement that Ross "has pledged to cut income taxes in a fiscally responsible way," apparently implying that Hutchinson’s plan is less than responsible.
To date, Ross’ talk of cutting taxes has mostly centered on the sales tax on manufacturers’ equipment.
"One of the first tax cuts I have proposed is to gradually phase out the state’s sales and use tax on partial replacement and repair of machinery used in manufacturing — as the state can afford to do so, much like how Gov. Mike Beebe has worked to gradually phase out the sales tax on groceries," Ross says in a statement on his campaign website.
Ross has estimated that phasing out the sales tax on manufacturers’ equipment eventually would cost the state $40 million a year. He has said the increments by which it would be cut would depend on what the state can afford from year to year.
Beebe declined to answer when reporters asked him Thursday whether he preferred Ross’ tax proposal or Hutchinson’s, saying he wants to get through next year’s fiscal session "before I start engaging in a whole lot of politics."
But Beebe added, "In fairness, I applaud (Hutchinson) for recognizing the need on any tax cuts to balance it with the revenue and the needs of the state, and the phase-out is obviously a much more responsible position than just whacking everything all at once without regard to the income. So to be fair, that’s a prudent approach."
Beebe may be appreciating a certain amount of irony. In 2006, Hutchinson was his main rival for the governor’s seat, and during that campaign Hutchinson criticized Beebe for proposing to phase out the grocery tax, saying he favored eliminating it all at once.
Hutchinson may also have learned from Beebe’s tactics during that campaign. Beebe announced his plan to phase out the grocery tax in January 2006 at an event where Hutchinson also spoke, resulting in Hutchinson apparently being caught off guard when asked by reporters for an immediate response.
Last Tuesday, Hutchinson announced his tax plan just hours before an event at which all of the announced gubernatorial candidates — Hutchinson, Ross and Republicans Curtis Coleman and state Rep. Debra Hobbs — were to speak, guaranteeing that he would dominate the day’s state political news and that his opponents would be asked for responses after having had little time to prepare.
Clint Reed, a Republican political strategist based in Little Rock, said Hutchinson clearly learned some lessons from the 2006 race.
"I think you’re seeing him run a very nimble, effective campaign thus far," Reed said. "He is sort of setting the tables to talk about issues that are to his benefit right now. Typically, Republicans have had an advantage talking about cutting taxes, and I think this whole debate has turned out to be an advantage for the Hutchinson campaign."
Bill Paschall, a Little Rock-based Democratic strategist, said it was a Democrat, Beebe, who created the model in Arkansas for cutting taxes gradually without affecting essential services. He said voters have come to expect that approach, so Ross and Hutchinson both will have to "show the math works."
Paschall acknowledged that Hutchinson’s income tax proposal would directly impact more people than a sales tax cut for manufacturers — with the caveat that Ross has only unveiled one part of his tax package so far — but said there are other factors to consider.
"The voters are going to have a lot to weigh there — not only how does it impact their wallet come tax day, but how it would impact essential state services, how it would impact the Arkansas state budget," he said.