by Max Brantley
* RELIEF FOR POOR WORKERS: The committee rejected, by a Republican motion to table, HB 1240 by Rep. Fred Love to give state income taxpayers a credit equal to 5 percent of the federal earned income tax credit. It would have helped 300,000 taxpayers and cost about $38 million in reduced revenue the first year. Opposition included remarks by a small business lobbyist who noted the lost revenue. I'm guessing he won't be testifying against Rep. Charlie Collins' coming bills to produce an even bigger revenue loss through income tax cuts disproportionately benefitting the wealthy. Rich Huddleston of Arkansas Advocates, pressed for the group's support for a cut when it often speaks of the damage from lost revenue, said that, if tax cuts were a given this session, "then we'd like to see the benefits of those tax cuts go to the families that need it the most."
* INCOME TAX CUTS: Rep. Charlie Collins is now pitching his HB 1585 to change the income tax brackets and cut the top rate of 7 percent to 6.875 percent for the wealthiest taxpayers. Arkansas Advocates for Children and Families has already analyzed the disproportionate benefit this would be to wealtheir taxpayers, while providing little or no benefits to middle class and working poor. Collins noted that Arkansas's top rate is higher than that in adjoining states (several of which enjoy higher property taxes, franchise fees equivalent to income tax and oil and gas tax revenue that Arkansas doesn't enjoy.) He said the reduction he proposes would be a "step in the right direction." Collins emphasized the number of taxpayers that would be affected by his tax cut as opposed to the spready of the dollars, a benefit falling at the highest end. His cut would cost $57.2 million in its first year of implementation. He said expected revenue growth would pay for the cut, including benefits to come from an expected windfall in Medicaid expansion if it happens. But he acknowledged that cuts could have an impact, if not on state operations, on surplus often devoted to capital improvement projects. Revenue Commissioner Tim Leathers said, however, that the cuts inevitably would impact general revenue spending.
Bill Kopsky of the Public Policy Panel testified that Collins' bill would exacerbate an existing unfairness in the Arkansas tax code by which lower income people pay a higher percentage of their income in taxes than the wealthy. It has become nearly a "moral issue" when the tax burden is double for poor people what it is for the rich. He said tax relief targeted to lower income people circulates back into the economy more quickly. Rich Huddleston testified about Arkansas Advocates' analysis which showed that 5 percent of taxpayers would get 50 percent of the benefits of the tax cut.
UPDATE: Collins' bill got a do-pass by a voice vote.
Still to come is a better plan from House Democrats, led by Warwick Sabin, to redraw the income brackets for the income tax to reflect inflation and to increase the standard deduction for nearly all taxpayers.
UPDATE II: Gov. Mike Beebe said he could get behind some additional tax cutting (not saying which ones) if the Medicaid expansion is approved, thus freeing some Arkansas general revenue money. I do wonder what the governor really has to say about much of anything. As long as the Republican bloc votes monolithically (and it generally does), what does it matter what he thinks?
UPDATE III: MORE COMFORT FOR THE WEALTHY: I've just learned House Speaker Davy Carter has called a special Revenue and Tax Committee meeting after adjournment today so that it can consider his bill to reduce the already reduced tax rate on capital gains (sale of property at a profit). Charlie Collins can't preach about the tax on work on this one. This is a break that will particularly benefit inheritors of great wealth, often wealth on which no taxes were ever paid (think the huge blocks of Walmart stock owned by Walmart heirs). It's an unconscionable giveaway, but assume the position. It's coming.