Arkansans who care about transparency in government received some bad news today.
According to an American Legislative Exchange Council (ALEC) study on tax cronyism released today, Arkansas is one of the worst states in the nation when it comes to reporting exactly what special breaks the state’s tax code gives to favored industries.
William Freeland, an ALEC research analyst who worked on the report, told The Arkansas Project in a phone interview:
The biggest thing here on Arkansas is in your reports: you guys don’t report whatsoever any sales tax expenditures. Most states … do carve outs not just for income tax and their corporate tax if they have them, but they certainly do sales tax carve outs and there is a good deal of them. Your state does not, at all, report on any of those.
Arkansas also gets low marks in the report for only tracking tax credits, according to Freeland.
Your state only looks at credits. They show tax credits to carve out the base but no deductions, exclusions, exceptions…things that narrow the tax base down besides credits. It’s a pretty small number. They’re looking at a very small percentage of the type of stuff that’s actually getting exempted from the (tax) base. (Arkansas’) number is probably one of the least accurate ones in the report, because there is so much we don’t even know about the different tax preferences that Arkansas does, how much they cost (and) even what they are.
The average Arkansan should care about how our state tracks “tax carve outs”, because they generally go to politically well-connected industries and take revenue out of the state tax base. This makes it more difficult for legislators to pass a broad-based tax cut benefitting more Arkansans, rather than just specific industries which get “tax carve outs.”
Let’s say a state needs to hit revenue figure X. The fewer the people that are in the tax base, the higher the rate has to go on everyone else.