LITTLE ROCK — Gov. Mike Beebe sounds like he’s playing chicken with the Legislature on tax cuts, but it may be the House and the Senate that are headed toward a collision course on how much the state can afford to lose in revenue.
The fight over tax cuts has been portrayed mostly as one between Beebe and the Legislature, especially after the House approved more than $60 million in cuts over the next two years and the governor said the state cannot afford them. Beebe may turn to a supporting role as the Senate plans to move forward with its own wish list of tax cuts this week.
Brushing aside warnings from Beebe that it would threaten the state’s budget, the House approved cuts in taxes on capital gains, manufacturers’ utility bills and single parents’ income. Instead of threatening a veto, Beebe has threatened to give lawmakers what they want by allowing the cuts to go into law without his signature, forcing lawmakers to detail what cuts they’d make to pay for them.
“This is not an exercise for somebody to vote to cut taxes and hope that somebody else fixes it for them. Everybody’s got to be responsible,” Beebe said. “My inclination is probably if that’s what they want to do and they want to make the cuts, the only way the people are ever going to know what that really means is to let it happen.”
Beebe may never have to follow through on the threat.
There’s no question lawmakers are in a tax-cutting mood this legislative session, with more than $245 million in cuts proposed by both Democrats and Republican. They range from back-to-school sales tax holidays to the capital gains tax cut, but the attention is narrowing down to a handful of proposals in both chambers.
For the House, the focus is on the three tax cuts approved last week, the most expensive of which is Rep. Ed Garner’s proposal to eliminate the capital gains tax on new investments in Arkansas companies and property. State officials say the proposal would cost the state $44.5 million if it goes into effect in the 2012 tax year, and would eventually cost the state $68.5 million annually — figures that Garner disputes.
That, plus a $3.8 million tax cut for manufacturers on utilities and a $3.7 million tax break for single parents, now head to the Senate Revenue and Taxation Committee.
This week, the Senate panel’s attention will be focused primarily on Beebe’s push for another half-cent cut in the grocery tax that will cost the state $20.8 million. The committee is also likely to approve a used-car tax cut that would cost the state about $5.8 million in the coming year.
With 34 of the 35 senators signed on as sponsors of the grocery tax cut and both parties’ leaders backing the used-car tax cut, both bills are poised for easy passage in that chamber. The future of the House tax cuts in the Senate is murkier.
Sen. Larry Teague, chairman of the Senate Revenue and Taxation Committee, said he doesn’t know if the tax cuts approved by the House will receive the same kind of support in the Senate. He said he likes the idea behind the tax cut proposals, but echoes Beebe’s worries about the impact they’ll have on the state’s budget.
“Do I think they’ll come screaming out of here like they did the other end? I’d be surprised,” said Teague, D-Nashville.
The obstacles may be greatest for the capital gains tax proposal. Garner’s proposal two years ago was approved by the House but rejected by the Senate committee. And the measure also must overcome the influence of Beebe, a former state senator who still looms large there.
But a rejection by the Senate of any of the House-backed cuts could spark a showdown within the Capitol, a risk that legislative leaders say is always present.
“The things we do here always give and take, and so ... the way our bills are handled in the Senate impacts to some degree how Senate bills are received in the House,” Moore said. “It’s always been that way. It probably always will be.”
Lawmakers say they’re not worried yet about the competing ideas stalling any tax relief, but say some give-and-take may be needed.
“I think each chamber has bills that they would rather see than others. As in any other thing, we’re going to have to have some sort of compromise to make all of this work,” said Rep. Davy Carter, R-Cabot, chairman of the House Revenue and Taxation Committee. “Would I expect that the House gets 100 percent of what it wants and nobody else gets anything? No, but I don’t expect the same if it’s reversed.”
DeMillo has covered Arkansas government and politics since 2005.