As usual, taxes were a major subtext when the Arkansas General Assembly convened yesterday and all the elected state officers took their oaths to follow the Constitution. But, as it has been under Gov. Mike Beebe, it was more about cutting taxes than raising them.
Beebe said lowering the sales tax on groceries another half of 1 percent was all that the state could afford without reducing vital services. Many Republican legislators and a few Democrats want to reduce taxes on rich people, mainly those with large investment incomes, but Beebe strongly implied that he would veto any tax-cutting bill besides the grocery tax unless the sponsors could locate savings somewhere in government that would not be harmful. Those savings would necessarily come from education, prisons, public health and law enforcement, which account for about 95 percent of the state’s general expenditures.
But, alas, there are always the highways. The better-roads constituency—contractors and suppliers, the Highway Commission and lots of county officials and merchants—is back imploring the legislature and the governor to provide more money for road building and maintenance. Our own thought is that there are more pressing needs than highways, which have enough money to maintain the status quo. But they have a point. Gov. Mike Huckabee and the legislature raised gasoline and diesel taxes heftily 10 years ago, but improving fuel economies and conservation have put those tax revenues on a downward trajectory. The cost of road work is rising and the revenues to do it declining.
Rep. Robert S. Moore Jr. of Arkansas City, the new speaker of the House of Representatives, emphasized road revenues in his inaugural address. He didn’t specify how he thought the money should be raised, but he hoped something would be done. The highway lobby, recognizing the folly of asking for an increase in motor-fuel taxes in an anti-tax climate, wants to siphon some money away from general revenues, for example by diverting sales taxes on automotive products from the general fund to highways. Beebe told the lawmakers flatly that he wouldn’t permit it.
We have a substitute plan that should be politically and morally agreeable: Raise the production tax on new natural gas from 1.5 percent of its market value to 2.6 percent of value and the tax on gas from old and distressed wells from 1.25 percent to 2.6 percent. That would raise as much money as the current sales tax on automotive supplies and the tax would not be borne by ordinary consumers, but by the big Texas producers that are making an unwholesome fortune off the state’s natural legacy and destroying the roads and countryside and degrading its water in the process.
The legislature—at least those lawmakers who were around in 2008 when they were tricked into voting for a bill that purportedly raised the severance tax to 5 percent to pay for roads and bridges—ought to be eager to vote for such a bill. It turned out that nearly all the enormous volume of gas in the Fayetteville shale play was not going to be taxed at 5 percent, but under a couple of provisos in the bill, exempted gas produced in the first three years of a well, or longer. That gas would be taxed at only 1.5 percent. Most of the gas is piped out in the first three years.
And the tax can be raised to 2.6 percent by a simple majority of the legislature instead of the three-fourths that is required to raise taxes beyond the levels that existed in 1934, when the state Constitution was amended. That was the tax rate back in the Depression.
If highway improvements are indeed so important, let’s raise the money in a way that is just and that actually brings money into the state and does not impair the purchasing power of consumers.
