Rep. Jon Woods (R-Springdale) sends along this commentary on HB1451 explaining why it is a tax that will hit the budgets of everyday Arkansans.
This is a wholesale tax, called a “fee,” on milk.
The impact of this tax, in terms of total number of Arkansans who will be impacted, will be greater than most taxes, even income taxes.
This is because virtually every Arkansan buys milk. Many people are exempted from other kinds of taxes. For example, there are plenty of Arkansans who pay no income tax because of low income, high credits, or exemptions. Just about everyone buys milk and their costs just went up with this bill.
And it’s a fundamental rule of economics that the tax accessed at the wholesale level will be passed onto the consumer.
The new money will be deposited into the state treasury. This is a tax.
Furthermore, this bill is just about government picking certain winners and losers in the marketplace, rather than those successes being determined by the markets based on things like price, quality and efficiency.
Examples of this protectionism are:
1. The fact that new entrants into the milk market are prohibited from receiving these payments for one year. If the bill really is to “stimulate” and “protect” milk production in Arkansas, wouldn’t you want to “stimulate” and encourage more milk producers to start up in the state? Of course you would. But when your real motivation is to line the pockets of existing producers, you add provisions like this to actually keep new comers out of the market.
2. Also, the bill builds in a set, artificial 30% profit margin for the producers as compared to neighboring states. Why is the calculation based on 70% of the neighboring states costs? If you are going to do a program like this at all, shouldn’t you require the Arkansas producers be at least as efficient as their neighbors? They should do what they can to become more efficient, at least at the same levels of people in near by states. And if they still can’t compete then perhaps you look at support programs. But using the artificial 70% figure just lines the producers’ pockets.