Democratic candidates say cut badly timed

Editor’s note: The Northwest Arkansas Democrat-Gazette sent a questionnaire to the 26 legislative candidates in our region in contested races. A questionnaire was chosen because of the ongoing covid-19 pandemic. Restrictions on gatherings curtail the usual sources of information to voters such as debates, forums and “meet the candidate” events.

This is the fifth of six stories on their answers. FAYETTEVILLE — Budget repercussions from the covid-19 pandemic have been better than feared, but Democratic candidates in contested Northwest Arkansas legislative races wonder if tax cuts set to take effect

in January are a good idea.

Others said they are certain the tax cuts are not a good idea.

Most of their Republican opponents, meanwhile, think the situation bears watching, but said the state has successfully managed the fallout so far.

The candidates gave their opinions in response to a questionnaire from the Northwest Arkansas Democrat-Gazette.

The candidates are all on the Nov. 3 general election ballot and seek to represent districts that include at least some part of Benton or Washington counties. All but three of the 26 candidates participated.

The question about the state budget was: “The pandemic has delivered a heavy blow to Arkansas’ revenue collections. How should the General Assembly respond? Which budgets should be cut and which ones should be increased? Should Arkansans be asked to pay more to cover essential services?”

Since the questionnaire went out Aug. 5, state revenue has shown strong growth. A Sept. 3 revenue report showed Arkansas’ general revenue tax collections in August up $56.9 million, or 11.2%, compared to a year ago to $564.9 million. The figure beat the state Department of Finance and Administration’s forecast by 10.6%.

The state Department of Finance and Administration cut the fiscal 2021 forecast for net general revenue available to state agencies by $205.9 million in a projection released April 2, citing an expected recession from the pandemic. State general revenue tax collections fell 28.3% that month compared to April 2019 — $270.9 million less.

Collections were down from last year for May and June. An increase in July revenue was mainly because of the decision to delay the state income tax filing deadline from April 15 to July 15.

September collections were down compared to September 2019, but only by 2%. September 2020 collections were $591.9 million.

The state has an income tax reduction set to take effect in January. The scheduled cut passed the Legislature in 2019 and was phased in over two years. The January reduction will drop the top-tier state income tax bracket from 6.6% to 5.9%. Those in that tier make $80,000 a year or more in taxable income. The cut this January is expected to reduce the state income tax haul by $22.9 million.

Almost 70% of the money retained by taxpayers in the January tax cut will go to people making more than $456,000 a year, critics of the plan estimate.

The state cut its general revenue budget for the fiscal year that ended in June by $353.1 million, taking that action in March to reduce the budget to $5.38 billion.

“The Legislature needs to return from recess to repeal the tax cut that was given to the wealthiest Arkansans, those making over $456,000,” said Kelly Krout, Democratic nominee for the House District 90 race.

“We need an equitable tax system that supports everyone in our community. We are in a time where people are experiencing unprecedented need, asking Arkansans to pay more to cover essential services is not the answer.”

Krout’s opponent, Republican Kendon Underwood, declined to respond to the questionnaire.

Krout is one of the four candidates, all Democrats, who call the upcoming tax reduction and the 2019 legislation creating it a mistake. One of those four is incumbent Rep. David Whitaker, D-Fayetteville in House District 85.

“Last session, my Republican colleagues gave a tax cut to the state’s top 1% of earners. Faced with a budget shortfall due to covid, the governor charged ahead with this tax cut anyway. Our state’s top earners did not need a tax cut.”

Whitaker’s opponent is Republican Brian Hester. He is one of three candidates, all Republicans, who responded that the chief solution to tough budget problems is to get the state’s economy back on track.

“Again, getting people back to work and getting businesses back on their feet will go a long ways toward making up ground on their recent struggles,” he said.

Another Democratic incumbent, Rep. Nicole Clowney of Fayetteville, said income tax cuts at the top end of the brackets should stop after the January step.

The pandemic has already done too much economic

damage to pass more cuts, she said.

“Now, more than ever, we must shore up our state unemployment insurance fund, invest in our health care systems and workers, our first responders, our teachers, our schools, our childcare, our grocery store workers, our postal service, our community colleges and our universities,” Clowney said. “And this work starts with refusing any more tax cuts for the wealthiest, until we invest in these priorities and people – investments that we know will pay dividends far into the future.”

Clowney’s opponent in House District 86 is John La Tour, one of the Republicans who see a revived economy as the best answer for any questions about the budget.

“They should get our citizens back to work so that we can get our economic engine back to generating revenue collections,” he said. “We can use common-sense safety measures to curtail the spread of the virus.”

Four more Democrats said a delay or repeal of the scheduled January tax reduction should be the first action if the state gets in budget trouble.

Nine of the 12 Democrats responding to the questionnaire said the tax cut should be repealed, should be considered for repeal or should go no further.

Eight of the 11 Republicans answering the questionnaire said the state had managed the crisis so far and should keep adapting to circumstances.

Rep. Jim Dotson, R-Bentonville, in House District 93 noted the state’s Revenue Stabilization Act automatically cuts the budget if expenses exceed revenues even if the Legislature took no action at all. Vital expenses such as education and interest payments on state debt wouldn’t be touched even in such drastic circumstances. The stabilization act passed in 1945.

His challenger, Daisy Bonilla, is one of the four Democrats who said the upcoming tax cut should be repealed.

Incumbent Sen. Jim Hendren, R-Sulphur Springs, also cited the Revenue Stabilization Act. His Democratic opponent, Ryan Craig, did not respond to the questionnaire.

Three of the Republican candidates and one of the Democrats pointed out how federal taxpayer pandemic relief has greatly eased the burden on state and local governments.