Tax Reform Task Force Hears From Other States’ Legislators on Successes, Failures

By Caleb Taylor

Members of the Arkansas Tax Reform and Relief Legislative Task Force met Tuesday to hear from state legislators from North Carolina, Oklahoma, Kansas and Indiana about the successes and shortcoming of their respective tax reform efforts.

General themes common in testimony throughout the day were that tax reform should be done deliberately, state spending will need to be kept under control and that good tax reform resists picking winners and losers in the tax code. For more on the Tuesday meeting, check out Nicole Kaeding’s post over at the Tax Foundation’s blog.

North Carolina House Speaker Tim Moore said legislators have to think about tax reform as a time frame rather than one event.

Moore said:

“We set and stuck to a tax reform time frame rather than seeking success from a single overhaul. I think that’s very important that you realize it’s a long game not a short game. The state can’t just do it in a sort of whip saw fashion. You have to do it over time and make sure that things are working.”

Senator Brandt Hershman of Indiana’s tax reform has caused state officials to begin reducing the amount of subsidies and credits it offers as incentives to attempt to attract private businesses.

Hershman said the state eliminated nine of these credits in 2013 and six in 2016.

Hershman said:

“The overall goal is a low, flat competitive tax code that doesn’t distort from an economic perspective. It doesn’t pick winners or losers. We’re not very good at it. We identify sectors broadly in which we believe we have a competitive advantage. We’ve provided some sector-based credits, but we do increasingly fewer deals for individual companies.“

Oklahoma Tax Commissioner Clark Jolley, a former state legislator, attributed his state’s fiscal troubles to the growth of state spending. More specifically, Jolley considers apportioned spending (spending already earmarked for a specific source) to be a major source of Oklahoma’s fiscal woes.

Jolley said:

“I think the tax cuts are getting a lot of the blame for something no one is talking about in Oklahoma and that is that we’re spending a lot of money that you don’t even see in our budget. Those are apportioned dollars. Apportionment is killing Oklahoma. Saying that we are going to spend money regardless of whether we have it to spend off the top before the Legislature gets to decide whether or not we’re going to do it is costing the state billions of dollars.

We should’ve done a better job with actually cutting spending. We did not do that. The main problem is the apportionment problem combined with having a tax code where we’ve done little changes here and there while not contemplating the overall effect.”

Kansas Rep. Steven Johnson compared his state’s tax reform efforts to 2012 to 2017. Johnson said revenue shortfalls that proceeded the 2012 cut legislation were a result of a failure to implement planned spending cuts and “overly optimistic” revenue growth assumptions.

Johnson said:

“In 2012, the factor was we’re going to drive growth and we’re going to be business-friendly. One of our growth assumptions in the numbers was we’re going to grow 4 percent year over year. I think that’s a pretty aggressive growth assumption. I didn’t quite buy into that one. In 2017, it had shifted to fiscal balance and addressing the shifting base. As we collected less, we recognized that we were necessarily causing future taxpayers to pay more.”

The next meeting of the task force is scheduled for Monday, January 8 at 9 a.m.