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Income tax relief bill passes committee Friday, Feb 2, 2007 By Jason Wiest Arkansas News Bureau LITTLE ROCK - Income tax relief legislation billed as an alternative to Gov. Mike Beebe's plan to reduce the state sales tax on groceries won a House committee's endorsement Thursday. A day after the Senate unanimously passed Beebe's proposal to reduce the 6 percent sales tax to 3 percent, the House Revenue and Taxation Committee advanced a proposal for a $75 per person income tax credit sponsored by its chairman, Rep. Keven Anderson, R-Rogers. "If grocery tax relief is a priority and getting some of the regressiveness out of our tax system is what is the driving force behind that, I believe we've come up with that better way," Anderson said. Anderson has the backing of House Speaker Benny Petrus, D-Stuttgart, who opposes Beebe's grocery tax cut and has coordinated an alternative House tax relief package. Beebe spokesman Matt DeCample said the governor knew alternative tax relief plans would be proposed and that some would advance and further the debate. "But that does not change Gov. Beebe's priority of providing responsible and meaningful tax relief by cutting the state's most regressive tax in half," DeCample said. Under Anderson's House Bill 1337, families classified as "working poor" would qualify for a $75 per person tax credit. More than 1 million taxpayers likely would qualify, Anderson said, including single taxpayers making $25,000 or less a year and married joint filers making $50,000 or less annually. Married taxpayers filing separately on the same return with a combined income of $50,000 or less and married taxpayers filing separately on different returns with income of $25,000 or less also would be eligible. "What we're talking about is giving back a full amount to these targeted people, which is going to be $300," Anderson said. The $300 figure would be the $75 per-person credit going to a family of four and is based on research that shows such a family spends $285 on sales tax for groceries yearly, he said. Beebe's proposal, Senate Bill 185 by Sen. Bobby Glover, D-Carlisle, would halve the 6 percent grocery tax beginning July 1. Anderson's estimated his bill would cost the state about $140 million over two years; Beebe's would lower tax revenues by $252 million over the same period. Also Thursday, the House tax committee endorsed another bill in Petrus' alternative tax package, HB 1336 by Rep. Johnny Key, R-Mountain Home, which would increase the income tax credit for retirees from $6,000 to $10,000 at a cost of $41.9 million over the next two years. The revenue loss is not accounted for in Beebe's proposed balanced budget. The House speaker has said that a third proposal in his package is being drafted which would reduce the sales tax that manufacturers pay for utilities from 6 percent to 3 percent, at an estimated cost of $30 million annually. Beebe favors a 1 percent reduction in the manufacturers utility tax. Not all taxpayers would get Anderson's proposed income tax credit. Retirees on Social Security, for example, or families just $1 over the income ceiling would lose the entire tax credit, said Tim Leathers, deputy director of the state Department of Finance and Administration. But Anderson said his bill also eliminates the worry that retailers would absorb the reduced sales tax that Beebe proposes, and would boost the economy because it injects more than $68 million into the economy each year all at once. "Most likely they're going to spend a high percentage of that," and as they spend, the state will collect taxes again, he said. "So what you're giving with one hand you're going to be taking back with the other hand," Rep. Horace Hardwick, R-Bentonville said. |
