More than $100 million in individual income tax cuts have been handed down by the Arkansas Legislature this year but the lowest paid Arkansans are not among the beneficiaries.
However those taking home pay that places them in the bottom 40 percent could find some relief under a plan up for consideration Tuesday.
“Let’s sign a bill and make it law [applause],” said Governor Asa Hutchinson to a room full of supporters and legislators.
Back in February, the Republican governor achieved his signature campaign pledge, a middle class tax cut.
“Those making between $20,000 and $75,000 I always called it the sweet spot of our economy,” said Hutchinson.
Not included in the tax cut, the state’s bottom 20 percent or so of income earners. However, as the legislative session nears an end, the state’s poorest will get a shot at tax relief under a bill by Representative Warwick Sabin.
“We also want to make sure that we’re taking care of the people that were left out of the tax cut, those making less than $21,000 a year,” said Sabin. His bill also extends his Working Families Opportunity Act– something like a state-version of the Earned Income Tax Credit - to the bottom tier of Hutchinson’s tax plan.
“The tax cut that we passed earlier in this legislative session was targeted to the middle class but the truth is everybody making between $21,000 and $30,000 a year are probably getting about a $3 benefit from that."
Sabin says his plan will do more.
“For a working family with a couple of kids, making anywhere between $20,000 and $30,000 a year, they may get an extra tax credit of about $300."
The bill by the Little Rock Democrat is headed to the House Revenue and Tax committee at the same time the Legislature is restoring a recently-repealed $21 million capital gains tax cut, from 2013. Which according to the Department of Finance and Administration is primarily a direct benefit to the wealthiest 10,000 Arkansans. It was held back earlier this month to help pay for the governor’s plan.
Another Representative sitting on the Revenue and Tax committee, Republican Charlie Collins of Fayetteville, said the capital gains cut is more important than Sabin’s lower-class cut. Speaking after Sabin's bill was filed Collins argued the capital gains cut will bolster what he calls the “job creating class.”
“The number one tax priority in Arkansas that’s next is restoring the capital gains structure to what it was,” said Collins.
Sabin contends a tax cut for the working poor will pay bigger dividends for the state than taxes for the upper echelon.
“That’s money that immediately circulates back into the local economy of Arkansas because these are people who are waiting for the extra money to buy new clothes for their kids or to get their car repaired or to get something done at their home,” said Sabin. “That’s money that supports local small businesses that has an immediately economic stimulative effect.”
Collins also said he’d like to pursue a tax cut for the low-income earners identified in Sabin’s bill, in addition to more cuts for upper income brackets, but said the timing is wrong.
“I don’t however believe that at the present time the money exists in the balanced budget to do that but theoretically and conceptually, and in the future I’d love to do that kind of a bill,” said Collins.
Despite budget hesitation from Collins, Sabin will try for his phased-in tax credit which he estimates to cost about $38 million dollars a year when fully implemented. He’ll be backed by the chairs of both the House and Senate Revenue and Tax committees. Democratic Representative Joe Jett and Republican Senator Jake Files are both signed-on as co-sponsors. But as for the governor?
Spokesman J.R. Davis sent KUAR the following:
"There are a number of great tax cut proposals out there, but unfortunately they don't fit in to our balanced budget proposal. We passed the Middle Class Income Tax cut earlier in the session which returns $100 million to middle class Arkansas families, and we're committed to working to further reduce the tax burden on Arkansans in the future."
Sabin says the money does exist in state coffers for lower-class tax cuts.
“My thought is that we’ve actually done a lot for the higher income earners here in Arkansas. They’re going to find money to pay for those so it really isn’t a question if we have the money,” said Sabin. “It’s really a question of whether this is a priority, whether working families are those who we want to support with this kind of tax relief.”
