I've credited Gov. Asa Hutchinson for a measure of progressivity in his income tax cut.
The graduated income tax is out of whack in Arkansas because of failure to index it for most of its 40-year run.
So Hutchinson knocked the top brackets down for taxpayers in categories between $21,000 and $75,000. And he proposed initially to take back a 2013 capital gains tax break that primarily benefitted wealthy people. He gave up on part of the capital gains takeback, however, and legislation introduced this week would give it all back, including the total exemption for gains over $10 million.
So, though the super wealthy will be served, one category of taxpayer has been left out — the working poor, those making less than $21,000 a year. Roughly a third of Arkansas taxpayers — maybe 400,000 tax filers — report earned income in that category.
The Times' Benji Hardy asked Hutchinson about the omission of low-income workers at his bill signing ceremony. He responded: "Because this focused on the middle class. Obviously, we have Arkansans that make less than that, and Arkansans that make more than that. This focused on those who have really been extraordinarily strained, and did not have some of the social program protections we have [for low-income people]."
Sen. David Sanders (R-Little Rock), defending the governor further, said the poor had been helped by the private option expansion of Medicaid, an increase in the minimum wage and the federal earned income tax credit.
They are simply wrong, first in asserting people making $75,000 are more "extraordinarily" strained than those making less than $21,000 and then in invoking "social program protections."
Republican faith holds that poor people dine from a buffet of welfare benefits. But let's look.
The earned income tax credit — a federal, not state benefit? A working couple earning about $20,000 a year isn't eligible if they have no children. A single taxpayer earning $8 an hour makes too much to qualify.
The minimum wage, just raised by voters, over opposition from most Republicans to $7.50 an hour? It provided no benefit to anyone making less than $15,600. About 20 percent of Arkansas taxpayers earn between $17,000 and $30,000.
The tax cliffs in Hutchinson's bill also present problems under Arkansas's income tax, which encourages married couples to file separately to double the standard deduction. A married couple — each making $10 an hour for a household income of around $40,000 — realize no benefits from the Hutchinson tax cut, though they are presumably as strained as a single wage-earner making $40,000.
Expanded health insurance? Many of the working poor don't qualify for the private option Medicaid expansion. A family of two's eligibility cuts off at roughly $21,000. There are some discounts on health insurance through the health marketplace for poorer workers, thanks to federally funded Obamacare, not an expenditure of state dollars.
Food stamps? A two-income household is disqualified over $20,000 in gross family income.
In short, there are a number of federally financed programs to help poor people. But all don't qualify for the sometimes meager benefits.
The governor's own chart showed an average tax cut benefit from his bill of $3 for those making $17,000 to $30,000, all to those making more than $21,000. The restoration of the full capital gains tax cut is worth $3.50 for every $1,000 in capital gains (unearned income on sale of appreciated assets).
During the campaign, Hutchinson demonstrated his fear of "welfare" when he resisted opponent Mike Ross' push for universal pre-K education. Hutchinson suggested it smacked of a welfare program, as opposed to a proven way of lifting people out of future poverty.
Hutchinson has a thoughtful side. He should dig into the numbers. He'll find working families exempted from his tax cut with modest to no "welfare" assistance, certainly none paid by the state of Arkansas. He might decide they are "extraordinarily strained," too.
Democrats are backing legislation for the equivalent of a state earned income tax credit for lower income workers. With the governor's support, it might even pass.