by Rep. Dan Greenberg: I didn’t have much hope for the final bill that I introduced this legislative session before our tax committee. It tried to solve a big problem – and my experience in the legislature is that the larger the problem you try to solve, the smaller the chance that your bill will pass.My bill tried to accomplish two things. One wasn’t controversial. Was the other controversial? Well, maybe a little bit. The uncontroversial goal was to require our state’s tax bureaucracy to calculate how much revenue was lost through income tax exemptions, credits, and incentives aimed at benefiting particular groups. I’d like to know how much that comes to, and the information isn’t readily obtainable.
The more controversial goal was that the bill would eliminate every single one of those special tax privileges about eight years from the date of passage – and in exchange for their elimination, everyone’s tax rates would drop proportionally. In short, the bill wouldn’t cost anything; it would just shift lower taxes from the favored few to everyone else.
Why do this? Well, we all know that every time the legislature approves a special tax privilege for one group, we’re shrinking the tax base. In my opinion, we ought to work towards lower tax rates for everyone, as opposed to having a higher tax rate for the general public with special privileges for a few.
Furthermore, things go so fast during the legislative session that it’s hard for us to set aside time to go over every single credit, exemption, and incentive and see whether we still need it. It is simple human nature to pay more attention to immediate and urgent needs, even if we ignore the important job of an overall review of our tax system. If we have a deadline, it will force a review.
We all know that there are plenty of worthwhile tax adjustments that are worthwhile and that would have universal support. We also know that if we actually passed something that forced elimination of special tax privileges with a deadline far in the future, the first thing that would happen is that we’d move to protect and preserve about half the measures that we’d otherwise strike away eight years from now. That’s fine with me: what that means is that we’d look at the other half later on and see if we still needed them.
Most importantly, here’s the upside of what would happen if we actually passed this. Most people’s income taxes would drop. That’s good not just for obvious reasons, but also for reasons of interstate business competitiveness. When Texas, Tennessee, and Florida have no income tax at all, we need to be as competitive as we can in order to attract new business investment. Furthermore, every time we got rid of some special tax privilege, everyone’s income tax would drop more, and lawmakers would have an additional incentive to pay attention to the cost of salting special-interest privileges into the tax code.
Some members of the tax committee thought this was a great idea. The first question I got was from Rep. Allen Maxwell, who asked me why I hadn’t included sales tax privileges in the bill along with income taxes. I answered back: “Are you suggesting that this bill isn’t ambitious enough? That it does too little?” This provoked guffaws from several committee members, who clearly thought that an 8-year deadline for tax privileges was a dangerous and radical idea that shouldn’t receive serious consideration. Rep. Maxwell was kind enough to make a motion to send the bill to the full House. The vote was anticlimactic: the NOs were a little louder than the YEAs, and the chairman ruled that the bill had failed to pass the committee. (In committee, the chairman typically decides whether a bill passes or fails depending on what I call “voice volume.” As you can imagine, this provides some opportunities for gamesmanship.)
If the voters send me back to the legislature again, I will try again to achieve the lower taxes that this bill would deliver. I think it is the only way we will ever have a broad review of whether our array of special tax privileges for special interest groups are all worthwhile.
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Dan Greenberg is an Attorney-at-Law and State Representative (District 31), Arkansas General Assembly. Although he directly represents northern Saline County, he also represents all Arkansans with public stands for limited, transparent and responsible government.
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