10-year record on taxes studied

Posted on Tuesday, October 9, 2007

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On Jan. 14, 2003, Gov. Mike Huckabee stepped into the well of the House of Representatives and turned to 135 legislators to give his State of the State address.

A part of his message: Lawmakers shouldn’t reject tax increases on ideological grounds because the state needed money to plug holes in the budget and to comply with a state Supreme Court mandate to boost public school spending.

“If you deem that all new revenue sources, your proposals or mine, are indeed dead on arrival, then you’ll be saying that teacher pay increases are dead, scholarships are dead, medicine for the elderly is dead, that long sentences are dead and that we’ll have to have a massive early release of thousands of inmates,” he told lawmakers.

1 More than 4 / 2 years later, Huckabee is running for president — and finding the pragmatic budget policies he backed as governor don’t fly with some in the fiscal-conservative wing of the Republican Party. The Washington anti-tax group Club for Growth, notably, has sought to portray Huckabee as “Tax Hike Mike” during his more than 10 years as governor. To counter that image, Huckabee boasts of 90 tax cuts during his tenure, which ended in January.

But a review of tax legislation passed while he was governor shows a net tax increase of $ 505 million, a figure adjusted for inflation and economic growth, according to the state Department of Finance and Administration.

Meanwhile, the average Arkansan’s tax burden grew from $ 1, 969 in the fiscal year that ended June 30, 1997, to $ 2, 902 in the fiscal year that ended June 30, 2005, including local taxes.

Huckabee shepherded through the Legislature one of the largest tax cuts in Arkansas history — a 1997 income-tax reduction totaling about $ 90. 6 million its first full year in effect. But most of the 89 other cuts Huckabee mentions are much smaller. A 1997 sales-tax break for some manufacturing machinery reduced tax collections by just $ 500 a year, for example. Some were narrowly targeted, such as a tax exemption for purchases by the Salvation Army, which reduced tax collections by $ 15, 000 a year.

Meanwhile, in three tough legislative sessions spanning 2003 and 2004, the Legislature raised taxes more than $ 500 million in order to fund essential state services and boost education spending.

The 2003 and 2004 sessions are instructive because they show how Huckabee wrestled with a tumultuous economy, a Supreme Court unafraid to exercise its authority and a Legislature controlled by Democrats.

“The government’s job is to provide basic necessities such as prisons to keep us safe and good roads to drive on,” he said through a spokesman via e-mail. “As Governor, that’s what I tried to do while being responsible with the revenue and state budget.”

In January 2003, legislators faced a slowing economy and a ruling from the state Supreme Court that the state’s system of funding public education was inadequate and inequitable.

Meanwhile, an economic downturn had reduced gross general revenue — most of that comes from income and sales taxes — to $ 3. 98 billion in the fiscal year that ended June 30, 2002, down from $ 4. 01 billion the previous year.

“That and the education issue put us in a situation where you either had to cut [spending ] or raise taxes or some combination,” recalls Rep. Keven Anderson, R-Rogers, who was then a freshman on the House Revenue and Taxation Committee.

Huckabee had proposed a 0. 625 percentage-point salestax increase, in part because it would be easier to pass than an income-tax increase. Under the state constitution, a simple majority can raise the sales tax; a three-fourths majority is required for an income-tax increase. But legislators weren’t buying. Some said their constituents were dead set against an increase, and others griped that Huckabee’s plan didn’t put aside enough money for education.

Some legislators favored a 10 percent income-tax surcharge, others increasing taxes on tobacco products. Still others sought to use money from a budget-surplus fund typically used to pay for pet projects in lawmakers’ districts.

By April, legislators and the governor hadn’t agreed on which taxes to raise or by how much, and the regular session dissolved into partisan acrimony. Lawmakers went home without passing any major tax increases or enacting a state budget.

When legislators returned on May 5 for a special session, Huckabee urged them to increase taxes and pass budget bills to stave off cuts in crucial state services. He said he would accept any of the increases lawmakers had proposed, including higher tobacco taxes, an increase in the sales tax or an income-tax surcharge.

“We’re no longer talking about merely shaving some excess,” he told legislators from the House floor. “We’re talking about amputating valuable and vital limbs if we don’t come up with necessary funding to meet the needs of those who depend on it.”

Bill Stovall, then a Democratic state representative from Quitman, says Huckabee at that point was open to negotiation and willing to hear lawmakers’ proposals.

“He had no particular direction, other than he was just trying to find a way to pass the budget,” said Stovall, who was House speaker in 2005-2006.

Three days after the start of the May special session, the Legislature passed a bill that raised taxes on tobacco products and established on a 3 percent income-tax surcharge. Huckabee signed the bill into law hours later. It raised $ 97 million its first year in effect.

But the bill didn’t tackle the court-ordered education spending, so lawmakers returned to the Capitol in December 2003. That session lasted into February, when the Legislature passed an 0. 875 percentagepoint sales-tax increase devoted to education funding. That would raise more than $ 400 million a year.

But Huckabee refused to sign the bill, complaining that the Legislature hadn’t done enough to pare school districts ’ administration costs. He called the Legislature’s work “maximum taxes for minimum reform.” It became law without his signature.

Former Rep. Boyd Hickinbotham, D-Salem, was chairman of the House Revenue and Taxation committee that year, and in a recent interview faulted what he called the governor’s lack of leadership in the winter legislative session devoted to education.

“The governor signed all these bills and spent all this money, and when it came time to raising taxes, he was nowhere to be found,” he said.

Through a spokesman, Huckabee said Monday in an e-mail, “The reason I didn’t support their tax hike was that I made it very clear that I would support the revenue if it matched the level of reform; they failed to enact the level of efficiency reform that we all knew was necessary.”

When times were easier and state coffers flush, Huckabee pushed through one of the largest tax cuts in Arkansas history.

In 1997, the first legislative session of his tenure, the Legislature doubled the standard income-tax deduction and adjusted rates to keep Arkansans below the federal poverty line from paying. That reduced revenues by $ 90. 6 million its first year in effect.

It’s unclear to what extent the governor can claim credit for the other 89 tax cuts.

One hundred representatives and 35 senators can introduce legislation, often at the behest of a lobbyist or special interest active in their district. Sometimes, a particular cut is merely a small part of intense budget negotiations among the governor and legislative leaders.

Huckabee’s supporters cast him as a fiscally responsible Republican who is smart enough not to oppose all taxes on principle alone. When asked about opposition from the Club for Growth, in particular, Huckabee played down criticism from that faction of the party.

“There will always be people who won’t be satisfied, and people who attack me,” he said through a spokesman. “When the majority of the base has a full understanding of my record, and they see the true story, they will understand it as I do.” A tax-cut sampler On the campaign trail, Mike Huckabee claims credit for 90 tax cuts during his tenure as governor. The Arkansas Department of Finance and Administration confi rms 90 tax cuts from 1997-2005. All but one required an act of the Legislature. Many were strongly backed by legislators and owe little to the governor’s efforts. The 90 cuts reduced tax collections by $ 378 million, according to the Department of Finance and Administration. Meanwhile, the department counts 21 tax increases that raised collections by $ 883. 1 million. Here are a few of the tax cuts, along with the department’s estimate of their impact in the following fi scal year: 1997 Authorized tax-exempt bonds for fi re-ant abatement (- $ 100, 000 ) Exempted residential lawn care from the sales tax (- $ 210, 000 ) Exempted Heifer International from the sales tax (- $ 60, 000 ) Exempted some county fairs from the special-events sales tax (- $ 15, 000 ) 1999 Exempted equipment used to produce sod, grass and nursery products from the sales tax (- $ 200, 000 ) Repealed the 20 percent tax on bingo admissions and cards (- $ 200, 000 ) 2001 Reduced taxes on bets made on horse races at Oaklawn Park (- $ 1, 700, 000 ) Reduced taxes on bets made at Southland Greyhound Park (- $ 600, 000 ) 2003 Exempted some health-club services from the sales tax (- $ 160, 000 ) Gave income-tax credits to biodiesel wholesalers (- $ 200, 000 ) 2005 Granted an income-tax deduction for organ donation (- $ 76, 000 ) Exempted Arkansas Symphony Orchestra purchases from the sales tax (- $ 20, 530 ) SOURCES: Department of Finance and Administration, legislation

Arkansas Democrat-Gazette

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