McCain - "An Argument Against Obama's Tax Plan"

"Make no mistake about it: Obama's plan to raise taxes on households making more than $250,000 will raise taxes on most small-business profits in America." -- Grover Norquist

"An Argument Against Obama's Tax Plan"
Grover G. Norquist
Politico
July 11, 2008

The Tax Policy Center and the Barack Obama campaign used some sleight of hand this week in Politico. To quote Eric Tolder of the TPC, "Most small-business people, like most everyone else, are not really high-income." While this is true, it completely and totally misses the point.

Let's start with the definition of a "small business." Most will tell you that small-business income constitutes income derived from sole proprietorships, partnerships and Subchapter S corporations.

The conservative argument (and that of the John McCain campaign) is that Obama's stated plan to raise taxes on households making $250,000 or more in income is a tax increase on small business. The simple answer to this dilemma can be found in the IRS Statistics of Income Bulletin (Table 1.4, for those who are interested).

So what do the data say?

In 2006 (the latest year available), $706 billion of such income was reported to the Internal Revenue Service. Of this, about half was reported by households in the top marginal income tax rate. Interestingly, two-thirds of this income was reported by households making $250,000 per year or more -- the very same households that Obama wants to increase taxes on.

The Obama campaign maintains that the number of small-business owners is what's important. Economists know what matters is the tax rate that's applied to the bulk of small-business income. Make no mistake about it: Obama's plan to raise taxes on households making more than $250,000 will raise taxes on most small-business profits in America.

What type of tax rate are we talking about? Currently, S corporations face a top tax rate of 35 percent, while sole proprietors and general partners face a tax rate of 37.9 percent (since they're responsible for paying both income tax and the Medicare component of the payroll tax).

Under Obama's plan to let the scheduled 2011 tax rate hikes occur, and his plan to raise the self-employment tax on those making more than $250,000, the S corporation rate would rise from 35 percent to 39.6 percent. The sole proprietor and partner rate would rise from 37.9 percent all the way up to a staggering 50.3 percent. Many Democrats in Congress have proposed making all small businesses (including S corporations) pay this 50-plus percent rate. A small business tax rate that high would be the highest marginal rate faced by them in nearly a quarter-century.

What would a world look like where two-thirds of all small-business income would be taxed at a 50 percent rate? The economic law that "taxing something more and getting less of it" would apply. Fewer Americans would be interested in opening or expanding small businesses. Tax evasion and legal tax avoidance would spike, as tax shelters would once again become a booming industry. Since small businesses create a majority of jobs in America, Main Street closing up shop will have a direct impact on the family budget, as well. Plants and equipment will go unused. Despite the misguided opinions of static scorers in Washington, federal tax revenues will likely decline as the economy staggers into a full-on recession.

What's the alternative? One place to look is the optional alternate tax system originally proposed by Congressman Paul Ryan (R-Wis.) and now endorsed by McCain. It would give households (including those with small business income) a choice between the current tax code and one with a top rate of 25 percent on all income over $100,000. This would have the beneficial effect of lowering the tax rate on most small-business income by 10 percentage points. Small businesses haven't faced a tax rate that low in quite some time and would be likely to respond with the creation of new businesses and more investment in existing businesses.

The McCain small business tax plan doesn't end there. For those businesses that are organized as conventional corporations, the top tax rate would fall from 35 percent to 25 percent, the European average. For all businesses, technology and equipment -- which now must be slowly "depreciated" over many years -- would be immediately expensed in year one.

Stepping back, voters and policymakers should ask themselves whether they want two-thirds of small business income taxed at a 50 percent tax rate or if they want nearly all small-business income taxed at a 25 percent tax rate. They should ask themselves whether it's healthier for small businesses to write off a computer over six calendar years or to simply write it off in year one. To America's small business sector, the answer is obvious.

Read The Op-Ed.

Romney: FACT CHECK: ARKANSAS VOTERS DID NOT APPROVE OF GOV. HUCKABEE'S GAS TAX HIKE

Despite His Claims, Arkansans Did Not Vote Themselves A Tax Hike
"Huckabee claimed a gasoline tax was only passed after 80 percent of voters approved it. Not true. The tax was enacted before a referendum vote on highway repairs." – Factcheck.org ("Huckabee's Fiscal Record," Factcheck.org, 11/21/07)

Gov. Huckabee Has Repeatedly Claimed That 80% Of Arkansas Voters Approved A Gas Tax:
On NBC's Meet The Press Yesterday, Gov. Huckabee Claimed That Arkansas Voters Supported A Tax For Highway Improvement. GOV. HUCKABEE: "He made claims about things like tax increases, but he failed to mention that some of those were either court-ordered or they were voted on by the people and approved by the people for things as roads." (NBC's "Meet The Press," 12/30/07)

On Fox News' Hannity & Colmes, Gov. Huckabee Said That 80% Of Arkansas Taxpayers Voted For A Gas Tax Hike. FOX NEWS' SEAN HANNITY: "You did support some tax increases, but some tax cuts. Can you explain that?" HUCKABEE: "Yes, I did. Certainly, there was an issue that involved road building and infrastructure on roads and bridges, and I did support that. … When we put that out there for the people to decide whether they wanted to affirm it, they did by an 80 percent vote, I would call that leadership." (Fox News' "Hannity & Colmes," 11/15/07)
On ABC's This Week, Gov. Huckabee Also Claimed That Voters Approved The Gas Tax Hike. ABC'S GEORGE STEPHANOPOULOS: "But you did raise those other taxes." HUCKABEE: "Well, here's what we did. On the gas tax, yeah, you know what we did? We put it on the ballot and 80 percent of the people of Arkansas voted for those fuel taxes because they wanted better roads." (ABC's "This Week," 2/11/07)

Gov. Huckabee's Campaign Chair Repeated The Claim This Morning On C-SPAN. ED ROLLINS: "And he – now he's being attacked for things like fixing the roads. The voters of Arkansas had the worst roads in the country according to 'Trucking' magazine. Truckers didn't want to go into the state. He went to the voters and he said, we have got these terrible roads. I'm going to give you an opportunity to vote a three-cent-a-gallon tax to fix the roads…" (C-SPAN's "Washington Journal," 12/31/07)

In Fact, Gov. Huckabee's Own Gubernatorial Website Contradicts The Story He's Telling Now:
In 2005, Gov. Huckabee's Website Said That The People Did Not Vote For The 1999 Fuel Tax. "The people did not vote on any of the taxes dedicated to repay these bonds. Federal gas and diesel taxes are passed and implemented by Congress, and the state funds to repay these bonds are coming from the diesel tax increase passed and implemented by the state legislature in 1999." (Gov. Mike Huckabee, "Setting The Record Straight," Press Release, 11/30/05, http://web.archive.org/web/20060926201257/www.arkansas.gov/governor/media/gems/11302005-1.html, Accessed 11/13/07)

Gov. Huckabee Has Been Misleading On The Issue:

Factcheck.org: "Not True." "Huckabee claimed a gasoline tax was only passed after 80 percent of voters approved it. Not true. The tax was enacted before a referendum vote on highway repairs." ("Huckabee's Fiscal Record," Factcheck.org, 11/21/07)

The Club For Growth Called Out Gov. Huckabee For His Misleading Statements On The Gas Tax. "While Huckabee repeatedly claims that 80% of Arkansas voters approved the gas and diesel fuel tax increases that he backed, the frequency of his repetition of this claim does not make it true. In fact, the claim is false. The Arkansas Legislature passed two bills in March of 1999 to pay for transportation projects, a gas and fuel tax hike, not subject to voter approval, and a bond issue that was contingent on voter approval. Huckabee signed the gas and diesel fuel tax increases into law on April 1, 1999; the tax hikes began taking effect that day." (Club For Growth, "Updated Huckabee White Paper," 11/13/07)

Gov. Huckabee Compromised With Democrats And De-Linked The Gas Tax From A Bond Issue:

Gov. Huckabee Agreed To A Diesel And Gasoline Tax Increase Even If His Bond Proposal Was Voted Down By The People. "But Huckabee on Thursday endorsed legislation that would impose a 3-cent tax increase on both diesel and gasoline - regardless of how the Governor's bond program fares." (David A. Lieb, "Dozen Republicans Split From Huckabee, Propose Alternative Highway Plan," The Associated Press, 2/26/99)

Gov. Huckabee's Compromise Plan Included "A Gasoline Tax Increase That Would Not Be Referred To Voters." "Gov. Mike Huckabee gave his blessing Thursday to an overhaul of his proposals for interstate repairs by including a gasoline tax increase that would not be referred to voters." (Noel E. Oman, "Huckabee Fits," Arkansas Democrat-Gazette, 2/26/99)

In April 1999, Gov. Huckabee Signed Legislation Increasing Gas Taxes WITHOUT VOTER APPROVAL:

"The Fuel Taxes Were Signed Into Law By Huckabee And Do Not Have To Go A Statewide Vote." "The bond issue is part of a highway package backed by Gov. Mike Huckabee that also includes a 4-cent diesel tax, to be phased in over two years, tax and 3-cent gas tax, to be phased in over three years. The fuel taxes were signed into law by Huckabee and do not have to go a statewide vote." ("Capitol Briefs," The Associated Press, 4/6/99)

The Vote On The Bond Proposal Was Not Tied To The Diesel And Fuel Taxes. "Although a tax increase is in the bond plan, voter approval of the bonds did not raise or lower any tax. Huckabee and the Legislature had already done that during the 1999 legislative session. They raised the diesel fuel tax 4 cents per gallon, earmarking part of that revenue to finance the bonds." (Ray Pierce And Elizabeth Caldwell, "Road Bond Issue Scores Big Win With Arkansans," Arkansas Democrat-Gazette, 6/16/99)

Gov. Huckabee Signed Legislation Increasing Diesel And Fuel Taxes, While Separately Issuing $575 Million Worth Of Bonds Depending Upon Voters Approval. "Gov. Mike Huckabee signed into law Thursday legislation to raise fuel taxes by $60 million a year and issue bonds worth $575 million to pay for Arkansas' first major road program since 1991. Diesel taxes go up immediately and the gasoline tax increase takes effect July 1, two weeks after voters decide whether to approve the bond issue intended to speed up repairs on the poorest stretches of interstates across the state." (James Jefferson, "Governor Signs Bills Raising Taxes, Bonds For Highway Program," The Associated Press, 4/1/99)

The People Would Have The Chance To Vote On JUST The Bond Proposal In June Of 1999. "Huckabee also set a June 15 special election for voters to decide whether to approve the bond issue, which is intended to speed up repairs on the poorest stretches of interstates across the state." (James Jefferson, "Governor Signs Bills Raising Taxes, Bonds For Highway Program," The Associated Press, 4/2/99)

In June 1999, Arkansans Voted 80% For The Highway Bond Proposal, NOT A Gas Tax:
The Vote On The Bond Proposal Would Not Impact The Tax Increases. "Voting on the bond issue would not change state tax rates. The legislature raised fuel taxes this year - 4 cents a gallon on diesel over two years, 3 cents a gallon on gasoline over three years - to hasten repairs on secondary highways and local roads." (James Jefferson, "Voters Back Huckabee's Road Plan," The Commercial Appeal, 6/16/99)

The Bond Proposal (WITH NO GAS TAX) Was Passed 80% To 20%.
"Gov. Mike Huckabee's $575 million bond program to reconstruct the worst stretches of Arkansas interstates over a five-year period appeared headed for an easy victory, 80 percent to 20 percent, becoming the first road bond issue approved since 1949." (James Jefferson, "Voters Back Huckabee's Road Plan," The Commercial Appeal, 6/16/99)

GOV. MIKE HUCKABEE "MEET THE PRESS" FACT CHECK

Look At Gov. Huckabee's Real Arkansas Record

MYTH: Gov. Huckabee Claims That Arkansas Voters Approved A Gas Tax For Highway Rebuilding:

Gov. Huckabee Claimed That Arkansas Voters Supported A Tax For Highway Improvement.

GOV. HUCKABEE: "He made claims about things like tax increases, but he failed to mention that some of those were either court-ordered or they were voted on by the people and approved by the people for things as roads." (NBC's "Meet The Press," 12/30/07)

FACT: Gov. Huckabee Signed The Highway Improvement Gas Tax Into Law WITHOUT Voter Approval:

The Club For Growth Has Called Huckabee Out For His Misleading Statements On The Gas Tax. "From the start of Huckabee's campaign -- literally -- the Club has been hounding the former Arkansas governor for what its leaders believe is his support of big government and higher taxes. Their latest gambit is a web video that seeks to paint Huckabee as flatly dishonest when it comes to his past statements about supporting an increase in the gas tax in Arkansas." (Chris Cillizza, "Club Vs. Huck," The Washington Post, 11/8/07; www.youtube.com/watch?v=zO-flytX2HQ)

At First, Huckabee Supported Linking A Gas Tax Hike To A Proposed Bond Issue:
Huckabee Supported "Road Improvement" Through Bonds And Diesel Tax Increase. "Last month, a highway panel appointed by Gov. Mike Huckabee proposed a road-improvement plan funded primarily by bonds. The only new revenue would come from a 3-cent increase in the state's tax on diesel fuel. Proponents of the plan believe it's fair to heap more taxes on the trucking industry, given that big trucks cause more wear and tear than cars." (Miguel Casas, "Trucking; Proposed Tax Increase Fuels Industry Concern," The Arkansas Democrat-Gazette, 11/1/98)

Huckabee Said The Diesel Tax Would Be Enacted Only If The Bond Proposal Was Passed By The Voters. "The governor's proposed $575 million bond issue and the $40 million rural-road plan both would be put to voters at a special election. Huckabee's plan also has a 3-cent-a-gallon diesel tax increase that would be collected only if the bond issue passed." (James Jefferson, "Panel Oks Rural Road Compromise, House To Vote This Week," The Associated Press, 2/22/99)

But, Huckabee Later Compromised With Democrats And De-Linked The Gas Tax From The Bond:

Huckabee Comprised With The Democrats And Agreed To A Diesel And Gasoline Tax Increase Even If His Bond Proposal Was Voted Down By The People. "But Huckabee on Thursday endorsed legislation that would impose a 3-cent tax increase on both diesel and gasoline - regardless of how the Governor's bond program fares." (David A. Lieb, "Dozen Republicans Split From Huckabee, Propose Alternative Highway Plan," The Associated Press, 2/26/99)

Huckabee's Compromise Plan Included "A Gasoline Tax Increase That Would Not Be Referred To Voters." "Gov. Mike Huckabee gave his blessing Thursday to an overhaul of his proposals for interstate repairs by including a gasoline tax increase that would not be referred to voters." (Noel E. Oman, "Huckabee Fits," Arkansas Democrat-Gazette, 2/26/99)

The Compromise Legislation Would Increase Both Diesel And Gas Taxes. "The compromise, melded into House Bill 1548, would provide for raised the state tax on diesel fuel 3 cents per gallon and the tax on gasoline 3 cents. Both now are 18.6 cents. Each increase would be phased in over three years, a penny a year." (Noel E. Oman, "Huckabee Fits," Arkansas Democrat-Gazette, 2/26/99)

In April 1999, Huckabee Signed Legislation Increasing Gas And Diesel Taxes WITHOUT ANY VOTER APPROVAL:

"The Fuel Taxes Were Signed Into Law By Huckabee And Do Not Have To Go A Statewide Vote." "The bond issue is part of a highway package backed by Gov. Mike Huckabee that also includes a 4-cent diesel tax, to be phased in over two years, tax and 3-cent gas tax, to be phased in over three years. The fuel taxes were signed into law by Huckabee and do not have to go a statewide vote." ("Capitol Briefs," The Associated Press, 4/6/99)

The Vote On The Bond Proposal Was Not Tied To The Diesel And Fuel Taxes. "Although a tax increase is in the bond plan, voter approval of the bonds did not raise or lower any tax. Huckabee and the Legislature had already done that during the 1999 legislative session. They raised the diesel fuel tax 4 cents per gallon, earmarking part of that revenue to finance the bonds." (Ray Pierce And Elizabeth Caldwell, "Road Bond Issue Scores Big Win With Arkansans," Arkansas Democrat-Gazette, 6/16/99)

Huckabee Signed Legislation Increasing Diesel And Fuel Taxes, While Separately Issuing $575 Million Worth Of Bonds Depending Upon Voters Approval. "Gov. Mike Huckabee signed into law Thursday legislation to raise fuel taxes by $60 million a year and issue bonds worth $575 million to pay for Arkansas' first major road program since 1991. Diesel taxes go up immediately and the gasoline tax increase takes effect July 1, two weeks after voters decide whether to approve the bond issue intended to speed up repairs on the poorest stretches of interstates across the state." (James Jefferson, "Governor Signs Bills Raising Taxes, Bonds For Highway Program," The Associated Press, 4/1/99)

The People Would Have The Chance To Vote On JUST The Bond Proposal In June Of 1999. "Huckabee also set a June 15 special election for voters to decide whether to approve the bond issue, which is intended to speed up repairs on the poorest stretches of interstates across the state." (James Jefferson, "Governor Signs Bills Raising Taxes, Bonds For Highway Program," The Associated Press, 4/2/99)

In June 1999, Arkansans Voted On The Bond Proposal For Highways, NOT A Gas Tax:
The Vote On The Bond Proposal Would Not Impact The Tax Increases. "Voting on the bond issue would not change state tax rates. The legislature raised fuel taxes this year - 4 cents a gallon on diesel over two years, 3 cents a gallon on gasoline over three years - to hasten repairs on secondary highways and local roads." (James Jefferson, "Voters Back Huckabee's Road Plan," The Commercial Appeal, 6/16/99)

The Bond Proposal (WITH NO GAS TAX) Was Passed 80% To 20%. "Gov. Mike Huckabee's $575 million bond program to reconstruct the worst stretches of Arkansas interstates over a five-year period appeared headed for an easy victory, 80 percent to 20 percent, becoming the first road bond issue approved since 1949." (James Jefferson, "Voters Back Huckabee's Road Plan," The Commercial Appeal, 6/16/99)

In Fact, Huckabee's Own Gubernatorial Website Contradicts The Story He's Telling Now:
In 2005, Huckabee's Website Said That The People Did Not Vote For The 1999 Fuel Tax. "The people did not vote on any of the taxes dedicated to repay these bonds. Federal gas and diesel taxes are passed and implemented by Congress, and the state funds to repay these bonds are coming from the diesel tax increase passed and implemented by the state legislature in 1999." (Gov. Mike Huckabee, "Setting The Record Straight," Press Release, 11/30/05, http://web.archive.org/web/20060926201257/www.arkansas.gov/governor/media/gems/11302005-1.html, Accessed 11/13/07)

MYTH: Gov. Huckabee Said "We Did Not Reduce" Sentences For Meth:

Gov. Huckabee Claimed He Did Not Reduce Sentences For Meth Manufacturers. GOV. HUCKABEE: "He said that I reduced methamphetamine sentences in Arkansas. Truth is I signed a bill in 1999 that doubled those sentences. We did not reduce them." (NBC's "Meet The Press," 12/30/07)

FACT: Gov. Huckabee Signed A Bill Reducing Mandatory Minimums For Meth Manufacturers:
Huckabee Supported A Measure To Reduce Mandatory Minimums For Methamphetamine Makers. "Methamphetamine makers could shorten their mandatory time in prison with good behavior under legislation approved Tuesday by the Arkansas House. The bill, by Sen. Jim Luker, D-Wynne, is part of a legislative package intended to help control the state's burgeoning prison population and is supported by state prison officials, the state prosecutors' association and Gov. Mike Huckabee." (Melissa Nelson, "Arkansas House Approves Bill To Reduce Mandatory Prison Time Of Meth Offenders," The Associated Press, 3/8/05)

SB 387 Lowered Mandatory Minimums For Meth Manufacturers From 70 Percent Of A Sentence To Only 50 Percent Of A Sentence. "Senate Bill 387 repeals a 1997 law requiring those convicted of manufacturing methamphetamine, among other crimes, to serve at least 70 percent of their sentence. Approved by a unanimous vote in the Senate and by a 56-32 vote in the House, SB 387 allows those inmates to serve half of their sentence if they've earned 'good time' for good behavior." (Arkansas House Of Representatives, "Prison Crowding And Saving Teachers' Insurance Plans Gain House Approval," Press Release, www.arkansas.gov, 3/11/05)
March 21, 2005: Huckabee Signed SB 387 Into Law. "Also Monday, Gov. Mike Huckabee signed into law legislation allowing imprisoned methamphetamine abusers serving time under the state's mandatory 70-percent rule to shorten their sentences with good behavior." (Melissa Nelson, "Senate OKs Higher Ed Funding Formulas," The Associated Press, 3/21/05)
Arkansas Democrat-Gazette: "Call It The Relief Bill For Meth Manufacturers." (Editorial, "A Perk For Drug Dealers," Arkansas Democrat-Gazette, 3/16/05)

The Bill Was Criticized Because It Reduced Sentencing For Meth Manufacturers Sentences, Not Meth Users. "This was a bad idea two years ago when the Department of Correction pressured the Ledge to back away from the 70 percent rule. It still is. Because the rule isn't aimed at the poor souls who wind up in jail only because they've used meth and got caught. The prisoners who would benefit by the Ledge's favor are the dealers-the source of the plague, the ones who cook up the drug and spread it around. These are the folks who prey on addicts lower down the drug chain. These are the manufacturers and merchants of so much misery in Arkansas." (Editorial, "A Perk For Drug Dealers," Arkansas Democrat-Gazette, 3/16/05)
Huckabee Admitted He Supported Weakening Penalties For Criminals Caught Running Meth Labs. STEPHANOPOULOS: "I understand not the drug users, but these were drug dealers here." HUCKABEE: "Well, and we didn't make this -- what you have to understand is that the significant difference was some of the penalties for these people could be up to life, and they still had that potential if they continued to manufacture drugs, but it was an adjustment in what had been an overreaching law that had previously passed." (ABC's "This Week," 12/2/07)

MYTH: Gov. Huckabee Said He Did Not Support Special Breaks For Illegals:

Gov. Huckabee Claimed He Did Not Support Special Tuition Breaks For Illegals. GOV. HUCKABEE: "He said that I supported special breaks for illegal aliens. That's not true, Tim. We supported simply giving children, who had earned a scholarship the same, it never happened, didn't make the legislature." (NBC's "Meet The Press," 12/30/07)

FACT: Gov. Huckabee Supported A Bill Granting In-State Tuition Breaks To Illegals:
Gov. Huckabee Proposed Extending Taxpayer-Funded College Scholarships To Illegal Aliens. "Gov. Mike Huckabee is proposing extending eligibility for state-funded college scholarships to illegal aliens who graduate from Arkansas high schools - an idea that several legislators predicted will go nowhere" (Laura Kellams, "Huckabee Plan Would Aid Illegal Aliens," Arkansas Democrat-Gazette, 1/12/05)

At Gov. Huckabee's Request, Arkansas Legislator Joyce Elliott Added His Scholarship Proposal To Her Bill Extending In-State Tuition To Illegal Immigrants. "In 2005, Huckabee tried to make children of illegal immigrants eligible for scholarships and in-state college tuition. Joyce Elliott, the former state representative who sponsored the scholarship measure, said she originally had wanted to offer just in-state tuition, but Huckabee's office asked her to add the scholarship provision. 'The notion I got from him is that he believed it was the right thing to do,' said Elliott, a Democrat from Little Rock." (Andrew DeMillo, "Huckabee Adopts New Tone On Immigration," The Associated Press, 12/27/07)

Yet The Scholarship Portion Was Stripped From The Bill:

The Scholarship Portion Of The Bill Was Stripped From The Bill. "The bill began as one touted by Gov. Mike Huckabee to allow undocumented Arkansans to qualify for state-sponsored academic scholarships the same way as legal residents. The governor, who drew criticism from some quarters for backing the proposal, said children who have been good students deserve the same opportunities, regardless of their parents' standing. Hard-liners, led by state Sen. Jim Holt, R-Springdale, said 'illegal aliens,' as they prefer, have no rights because they're lawbreakers. It may not be fair to single Holt out because he had plenty of company. When House Bill 1525 stalled in a Senate committee, the scholarship portion of the bill was stripped out, sending the measure to the Senate floor, where it failed twice, the final time by only two votes." (Dennis Byrd, "Federal Judge: Illegal Immigrants Qualify For Tuition Breaks," Arkansas News, 7/10/05; www.arkansasnews.com/archive/2005/07/10/DennisByrd/324273.html)

And The Bill That Was Actually Voted On Only Included In-State Tuition Breaks For Illegals:
H.B. 1525, "Access To Postsecondary Education Act Of 2005": www.arkleg.state.ar.us/ftproot/bills/2005/public/HB1525.pdf

The Bill Gov. Huckabee Actually Pushed Granted ONLY In-State Tuition Breaks For Illegals:
Gov. Huckabee Fought To Pass The Stripped Bill Which Granted ONLY In-State Tuition Breaks For Illegals. "Other than the highway plan, the only bill in the governor's 21-bill legislative package that failed to win legislative approval was a proposal to make the children of illegal immigrants eligible for state-funded scholarships and in-state tuition to Arkansas colleges. After passing the House relatively early in the session, the bill faltered in the Senate where it was amended to remove the scholarship provision but fell just short of passage Tuesday and Wednesday. Huckabee said his office worked throughout the day Wednesday for the two Senate votes needed to pass the bill. 'I don't understand the opposition to it, I just honestly don't,' Huckabee said. 'It hurts me on a personal as well as a policy level to think that we are still debating issues that I kind of hoped we had put aside in the 1960s, maybe at the latest the 70s, and yet I understand people have deep passions about things usually they don't fully understand.'" (Melissa Nelson, "Governor Touts Successful End To Legislative Session," The Associated Press, 4/13/05)

The Washington Post Called Out Huckabee's Misleading Statements. "On Fox News Wednesday, he was asked about a bill he supported as governor that would have granted tuition breaks to the children of illegal immigrants. He suggested that he had only wanted to give such children access to scholarships. 'What I supported was the idea that if a student had been in our Arkansas high schools and had done academically well to be able to compete for an academic challenged scholarship which was meritorious then that student should be able to have the same opportunity as anyone else,' Huckabee said. In fact, the initial bill he supported did have a scholarship provision. But that provision was later stripped out, and was not included in the legislation that Huckabee continued to push. The bill read: 'Any tuition rate that is granted to residents of Arkansas shall be granted on the same terms to all persons, regardless of immigration status, who have attended a secondary educational institution in Arkansas for at least three (3) years and who have either graduated from an Arkansas high school or received a general education diploma in the state.'" (Michael D. Shear, "Rising in Iowa Polls, Huckabee Now In Crosshairs," The Washington Post, http://blog.washingtonpost.com/the-trail/2007/11/15/on_a_roll_in_iowa_huckabee_fac.html, Posted 11/15/07)

MYTH: Gov. Huckabee Does Not Agree With Reports Of His Budgets In Arkansas

Gov. Huckabee Claimed That Figures About His Spending As Governor Were "Ridiculous." GOV. HUCKABEE: "He made allegations that our increased spending by ridiculous amounts…" (NBC's "Meet The Press," 12/30/07)

FACT: The Arkansas Democrat Gazette Reported That Spending More Than Doubled Under Gov. Huckabee:

Arkansas Democrat-Gazette: Under Huckabee, State Spending More Than Doubled From $6.6 Billion To $16.1 Billion. "During Huckabee's 10 years as governor, state spending more than doubled, from $6.6 billion to $16.1 billion in the fiscal year ending June 30, 2006. Higher education and public schools got big increases, as did social services." (Daniel Nasaw, "Home Turf Not Rock Solid For Huckabee," Arkansas Democrat-Gazette, 10/4/07)

Former Arkansas Legislator Jake Files: "Jake Files, a former Republican Arkansas legislator, said that during Huckabee's tenure, government spending more than doubled: From 1996 to 2006, spending increased from $6.6 billion to $16.1 billion, he said. Files hasn't endorsed anyone for president." (Lisa Rossi, "Arkansans Criticize Huckabee's Budgets," The Des Moines Register, 12/15/07)

Huckabee: Truth Squad: Response to Misleading Club For Growth Attack Ad

Governor Huckabee's record on taxes as a steward of the public’s money has been CLEAR and consistent as a conservative with strong pro-growth.policies. The Club for Growth misrepresents this record.

Governor Huckabee is a fiscal conservative who cut taxes almost 100 times in the state of Arkansas. He doubled the standard deduction and the child care credit, eliminated the marriage penalty, repealed capital gains taxes for home sales, lowered the capital gains rate, expanded the homestead exemption and set up tax-free savings accounts for medical care and college tuition.

The fact is that when Governor Huckabee began in office, the tax rate was 1% for the poorest taxpayers and 7 percent for the richest – the tax rates remained exactly the same when he left the governor’s office 11 years later. The sales tax only went up 1 penny in 10 ½ years and the gas tax 3 cents per gallon.

The Governor believes differently than the Club for Growth – there are many in that group who believe that believe public FUNDING should never be considered to pay for such things as highways, prisons, schools and Medicare.

About the Video Clip
In 2003 the state's chief financial officer projected a $62.3 million revenue shortfall that would result in cuts in state services, possible layoffs, tax increases or the possible repeal of late 1990s tax cuts.

Governor Huckabee told the Legislature that he would accept any recommendation they could agree on in order to meet the law's requirement to balance the budget. The Legislature was presented a series of options and chose to increase the tax on tobacco.

About the Club for Growth's Attack Ad
The attack ad was financed by Steve Stephens, the chairman of ClubforGrowth.net and a wealthy political rival from Little Rock.

Because Governor Huckabee supports earmark reform, Stephens stands to lose millions of dollars in pork for his businesses when the Governor is elected President.

(“Earmarks” is the term used to refer to a provision in legislation that directs funds to be spent on specific projects. Typically, legislators use earmarks to direct money to a particular organization or project in his/her home state or district. These mandates circumvent the merit-based or competitive allocation process.)

Even the liberal New York Times said that the Club for Growth was distorting Governor Huckabee's record. Last week they wrote an article explaining how the tax increases were used to improve education and infrastructure in Arkansas. [Note: The full text of the article is at the end of this briefing sheet.]

The link to the NYT article: http://www.nytimes.com/2007/12/02/us/politics/02huckabee.html

Why the Governor Raised Taxes
The Arkansas constitution, in a measure that should be lauded by all fiscal conservatives, requires that the state budget be balanced.

More than 90% of the state's budget is spent on education, Medicare, prisons, and human services.

Naturally, cutting spending is always the first response of conservatives, as it was for Governor Huckabee. But that solution is inadequate when there is very little discretionary spending available in the budget.

Unable to resort to deficit spending (as other candidates are able to do) the Arkansas Legislature was forced to raise taxes to pay for infrastructure repair, conservation efforts, court-mandated education expenditures, and unfunded federal mandates.

Governor Huckabee returned almost $400 million to Arkansas taxpayers. He believes it is immoral to take more money from taxpayers than is needed to run the government, and if a surplus occurs because of growth in the economy and good fiscal policy, it should be returned to the people.

He was the first Governor of Arkansas to pass a broad-based tax cut in the history of the state.
He also doubled the standard deduction to $2,000 for individuals and to $4,000 for married couples, as well as the childcare tax credit and eliminated the marriage penalty.

He eliminated the capital gains tax on the sale of a home. He eliminated the state income tax for families below the poverty line.

He reduced the capital gains tax for businesses and individuals.

He indexed the income tax to protect people from paying higher taxes because of "bracket creep."

Governor Huckabee left the state with almost a $1 billion surplus- a state record, setting the stage for further tax reductions. The “Huckabee Surplus” enabled his successor to follow Huckabee’s lead to begin the elimination of the state sales tax on food.

He urged that the surplus should go back to the taxpayers in the form of a rebate or tax cut.
He cut welfare rolls by almost 50 percent.

With respect to the tax and spending that he had under his control, spending rose about six-tenths of one percent a year during his ten-and-a-half year tenure.

Specific Taxes Mentioned in the Attack Ad
Sales Tax Hike (1996): Voters approved 1/8 cent sales tax increase to fund conservation and park services to preserve Arkansas natural and cultural heritage.

Gas and Diesel Fuel Tax Hike (1999): Arkansans supported a 3 cent per gallon fuel tax increase that allowed Arkansas to completely rehabilitate the interstate highway system, changing the interstate system from one of the worst in the country to the best according to Truckers Magazine.

Cigarette Tax Hike (2001): The cigarette tax increase of 25 cents per pack was used to fund state healthcare obligations. Arkansas tobacco taxes are still low, 33rd in the U. S.

Nursing Home Bed Tax (2001): The bed-tax on private nursing home patients was instituted to generate revenue for a nearly 3-to-1 match in federal Medicaid funds. Without this revenue low-income patients would not be able to find beds in nursing homes.

Grocery Tax: Huckabee opposed repeal (2002): This was actually a soft drink tax that Governor Huckabee opposed abolishing because it would drain $168 million from the state's Medicaid budget.

Income Surcharge Tax (2003) – In 2003 there was a temporary increase in the income tax to offset the economic recession our country was facing in the aftermath of the terrorist attacks of September 11, 2001. They were needed for one year, and unlike most “temporary taxes,” Governor Huckabee made sure that the legislature kept its promise to the people that it was eliminated after two years.

Tobacco Tax Hike (2003) – This is the tax from the video clip that the Club for Growth uses in their attack ad. In 2003 the state's chief financial officer projected a $62.3 million revenue shortfall that would result in cuts in state services, possible layoffs, tax increases or the possible repeal of late 1990s tax cuts. The Legislature was presented a series of options and chose to increase the tax on tobacco.

Taxes on Internet Access – Governor Huckabee has always been staunchly opposed to any tax on Internet access.

Beer Tax: Huckabee opposed letting the tax expire (2006) – The tax was used to fund programs for abused and neglected children. Without the tax there would be no funds for those programs.

Full Text of New York Time Article

"Huckabee’s Stature Rises, Mobilizing Tax Critics" by Leslie Wayne (12/2/07)

As Mike Huckabee rises in the Republican presidential polls, fiscal conservatives have been raising alarms about a series of tax increases he oversaw while governor of Arkansas — new taxes on gasoline, nursing home beds and even pet groomers.

The Club for Growth, a politically influential antitax group, has dubbed Mr. Huckabee Tax Hike Mike and poured money into anti-Huckabee advertisements that were broadcast in early nominating states, with more on the way. Mr. Huckabee “spends money like a drunken sailor,” according to the group’s news releases, and it has sprinkled YouTube and the airways with videos that mock him and his policies.

But the record offers a more complex and nuanced picture. While taxes did rise in the 10 years that Mr. Huckabee was governor, the portrayal of him as a wild-eyed spendthrift is hardly apt. For the most part, Mr. Huckabee’s tax initiatives had wide bipartisan support, with the small number of Republicans in the overwhelmingly Democratic state legislature voting for the tax increases and many maintaining that the state was better for them.

In addition, when Mr. Huckabee left office last January, he had turned a $200 million budget shortfall into an $844 million surplus. Still, as the attacks on his fiscal policies have stepped up, the Huckabee campaign has also cited examples of some 90 taxes that went down under his tenure.

But over all, on balance, tax increases outweighed the tax cuts by some $500 million, and many of the cuts that Mr. Huckabee heralds owe little to his efforts.

“He got bipartisan support on all the tax increases,” said State Senator Kim Hendren, a veteran Republican and member of the legislative budget committee. “Huckabee didn’t say ‘I just want to raise taxes to start programs.’ He has a liberal heart for young people, for the disabled and for improving Arkansas’ lot in education, and he is pretty good at working across party lines.”

Mr. Huckabee’s record on the tax front is emerging as a pivotal issue as he seeks to win the Jan. 3 Iowa caucuses and other early nominating states. In Iowa, he has built his following around Christian conservatives, but the tax issue could resonate in states like New Hampshire, which holds its primary five days later and where Mr. Huckabee has been devoting more time.
The attacks on him over taxes come as he faces criticism on other aspects of his record as governor, including fighting for tuition breaks for the children of illegal immigrants.

The biggest increase under Mr. Huckabee was mandated by the Arkansas Supreme Court, which in 2002 ruled that the state’s school financing procedure was unconstitutional and ordered a more equitable plan — which led to $400 million in new taxes.

Some other taxes came about directly because of Mr. Huckabee’s efforts. After becoming governor in 1996, he traveled the length of the Arkansas River within the state to win support for an additional one-eighth-cent sales tax to improve the state parks system.

Early in his tenure, he pushed through a three-cent-a-gallon gasoline tax increase and a four-cent increase on diesel fuel, along with a bond issue, to improve a road system that was considered one of the worst in the country.

And when the state lacked enough of the necessary matching money for federal Medicaid payments to its nursing homes, Mr. Huckabee and the legislature enacted a $5.25-a-day “bed tax” on nursing homes, which won the grudging approval of the state’s nursing home industry.
All of this has become fodder for the Club for Growth and other antitax groups. At the Republican YouTube debate on Wednesday, an advertisement shown by a rival candidate, Fred D. Thompson, directly attacked Mr. Huckabee’s tax policies.

“We’ve been making noise about Huckabee since Day 1 of his candidacy,” said Nachama Soloveichik, a spokeswoman for the Club for Growth, which analyzes the tax policies of Republican candidates. “There is a groundswell among conservatives that this cannot be our guy.”

Both Democratic and Republican politicians and political observers say the legislature had little choice but to raise taxes from 2002 to 2004 given the fiscal challenges facing Arkansas.

The biggest tax increases came in 2003 and 2004. A sagging economy had cut into revenues and the state faced a 2002 court order to equalize financing among school districts.

“We had our backs against the wall; we had no choice,” said State Senator Bobby Glover, a Democrat who has been in the legislature off and on since 1973. “Our only other choice was to take more from prisons and heath care and other agencies.”

In the end, the $400 million tax increase package was passed by an overwhelming majority, with Republican legislators taking the lead in pushing for it along with Democrats. The items included a sales tax increase of seven-eighths of a cent, the imposition of sales tax levies on several previously exempt services and some lesser taxes.

“Republicans were fighting for the tax increase,” said State Senator Denny Altes, the Republican minority leader of the State Senate who did not support the package. “There were few votes against it. Some of the most conservative people, both Democrats and Republicans, supported it. It passed by 90 percent.”

In general, Mr. Huckabee supported tax increases when he had a defined goal in mind, whether it was schools, roads or parks.

“He tended to raise taxes for specific government programs,” said Jay Barth, an associate political science professor at Hendrix College in Conway, Ark. “He does believe in a robust government as an active force in the lives of its citizens, especially in helping the little guy.”
The Club for Growth is circulating a video of Mr. Huckabee speaking to the legislature and going through a litany of all the taxes he could support, leaving the impression that there is no tax he would not embrace.

But the purpose of Mr. Huckabee’s address was specific: Arkansas was facing a multimillion-dollar budget shortfall and Mr. Huckabee was pleading for a tax increase to cover it — any tax, and listing all the possibilities.

The other big tax increase, which also received bipartisan support, was the one on gasoline to pay for road improvements.

“Our roads were in terrible condition,” said Dennis Milligan, chairman of the Arkansas Republican Party. “We knew that in order to attract jobs and companies we needed better roads. Huckabee made a wise choice and now we have companies locating here and wonderful roads. He did a lot to improve roads, and you can’t do it for free.”

In the face of criticism from fiscally conservative Republicans, Mr. Huckabee has been spending more time talking about the taxes he cut than the ones he raised. For instance, at the Republican debate last week, he said that he had cut 90 taxes and that the sales tax was only a penny higher under his stewardship.

Of the 90 tax cuts cited by Mr. Huckabee, one was large: an increase in the standard deduction for income taxes. But most were very small, with some reducing state tax revenues by as little as $15,000 to $20,000, according to an Arkansas Department of Finance and Administration study that was reported in The Arkansas Democrat-Gazette.

Still, the Huckabee campaign has set up a “Truth Squad” specifically intended to rebut the Club for Growth.

“Antitax radicals will never be convinced that tax monies can be legitimately spent on highways, bridges, schools and Medicare,” the campaign said in a response to the Club for Growth.