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My way or no highway Saturday, Mar 22, 2008 By Doug Thompson My way or no highway. That's a rough sum-up of the situation Gov. Mike Beebe's leaving for legislators on his severance tax proposal. He gets his preferred option of the increase or he neuters the biggest criticism against him. That's the criticism that he hasn't done enough for roads. Passing the tax is clearly the governor's preference. Otherwise, he wouldn't have spent so much time negotiating a deal drillers can swallow. If it fails, though, getting money for roads out of him will only get tougher. More about that later. Passage of the tax is up to the Legislature. That body includes people who don't like raising any taxes. That's true even when the United States isn't sinking into recession during an election year. Add some lawmakers who don't like the severance tax in particular. Throw in the need for a three-quarters vote in each chamber. The classic Reganomics view holds that not taxing the gas industry will spur growth. That growth will raise more money than the severance tax will. That's one way to look at it. Here's another: All that growth being spurred goes into the state's general fund. The general fund will open up to highway spending over the governor's dead body. He wants any general fund growth to go for continued cuts on the sales tax on groceries. Beebe can argue that the severance tax and the grocery tax cuts, taken together, amount to a shift of the tax burden from people who buy food to those fortunate enough to collect royalties on gas wells. He can also argue that his package amounts to a significant shift in state spending from the general fund to highways. Ninety-five percent of the severance tax collections would go to roads, the rest to the general fund. Of the 95 percent share, 70 percent of that would go to the state. Cities and counties would splilt the rest. Fair or not, Beebe can argue that opponents of the severance package who still want roads would rather keep taxing poor people's corn meal than the royalties on natural gas that's sold to people in other states. Fair or not, he can tell lawmakers who bring him a road package in the future that, if it draws on general funds, "You should have voted for the severance tax." If a rabid spendthrift dog bit Beebe, the chances of getting something higher than $60 million out of the general fund for roads would still be dim. People tried in good economic times. Now unemployment's up. The housing boom in Northwest Arkansas' gone bust. Growth in other areas of the state has covered losses in state revenues so far. Still, tax collections cannot defy gravity forever. Somebody show me a better option here. That's not a rhetorical question. About the only other I've heard of is redistributing what money we have, as proposed by Rep. Donna Hutchinson, R-Bella Vista. That wouldn't add money. Whatever options there are for adding money are shrinking. As I write this, the U.S. Federal Reserve is assuming a major lender's risk to stave off a credit crisis. That's the first time the Fed has done that since the 1960s. I'm writing this just before going on vacation. Things will probably get worse I get back. Just for laughs, let's speculate on whether the federal government might save our hides on highways. The country's going into recession. We're still at war. The federal budget would be nowhere close to balanced even if we weren't at war. Then there's the finance crisis because of sub-prime mortgage lending that I mentioned earlier. Hmmm. Let's see: A very expensive bailout of lenders who made horrible sub-prime home loans by the bushel basket, or more money for vital highways? Gosh, I wonder which way Congress will go? That was a joke. Sorry it wasn't a better one. You can argue that now is not the time to raise taxes. You'd have an excellent point. You'd also have to consider the trade-off. That would be the slim-to-none chance of a significant increase in state spending for roads. --------- Doug Thompson is a Fayetteville-based reporter and columnist for the Arkansas News Bureau and the Morning News. His e-mail address is dthompson@arkansasnews.com. |
