by Max Brantley
A State Earned Income Tax Credit (EITC) is a more streamlined approach that benefits low-income families and the state economy. A 5 percent EITC would be cheaper than Hutchinson’s current low-income tax cut plan (only $40 million compared to $50 million), and it would put a lot more money into the hands of our most financially vulnerable working families. In the chart below you can see that a state EITC would be far more beneficial to the lowest 40 percent of earners in Arkansas. That group – who makes less than about $32,000 a year – are more likely than more wealthy Arkansans to spend any extra money in the local economy. EITCs are proven to help these families move into the middle class, and boost local businesses along the way.About half the states have an EITC. The federal credit had bipartisan support because it's been shown as incentive to work. The more you work and earn, the greater the credit.
Hutchinson’s plan does technically reduce the tax burden for people earning less than $21,000 a year, but that fact is misleading. If you ask any accountant, you’ll find that there is some fantastic breadth in the variations of what “making money” can mean. Hutchinson’s bracket changes are based on “taxable income,” not wages, salary, or even adjusted gross income. That means we would be cutting refund checks based on what your reported income is after subtracting itemized deductions, capital gains exclusions, business losses, etc. There are always going to be taxpayers with a lot of income and little “taxable income” for various reasons. You can “make” quite a lot of money, and still easily come in under $21,000 in taxable income.