LITTLE ROCK — Tax cuts will be on the agenda of the Arkansas Legislature when the second week of its 91st regular session begins Tuesday.
Lawmakers will return to the Capitol a day after Monday’s state holiday honoring the Rev. Martin Luther King Jr. and Robert E. Lee. Bills expected to be heard in committees include matching measures containing Gov. Asa Hutchinson’s proposed $50 million income tax cut for low-income Arkansans.
Low-income tax cut
Senate Bill 115 and House Bill 1159 are sponsored by the majority leaders of both chambers, Sen. Jim Hendren, R-Sulphur Springs, and Rep. Mathew Pitsch, R-Fort Smith. Under the proposal, tax rates for Arkansans earning less than $21,000 a year would change in the 2019 tax year as follows:
From 0.9 percent to zero for people earning $4,299 or less a year; from 2.4 percent to 2 percent for people earning between $4,300 and $8,399; from 3.4 percent to 3 percent for people earning between $8,400 and $12,599; and from 4.4 percent to 3.4 percent for people earning between $12,600 and $20,999.
The proposal also calls for creation of the Arkansas Tax Reform and Relief Legislative Task Force. The task force would have 16 members, including the House speaker, the Senate president pro tem and the majority and minority leaders in each chamber, or their designates; and five members of each chamber, to be chosen by the House speaker and the Senate president pro tem.
The task force would be required to present recommendations for future tax reforms to the governor by Dec. 1. Hutchinson is expected to announce later this year he will seek a second term in 2018.
Hendren, the governor’s nephew, said last week he plans to present SB 115 in the Senate Revenue and Tax Committee on Wednesday. Pitsch said he plans to present HB 1159 in the House Revenue and Taxation Committee either on Tuesday or Thursday.
Both said they expect the bills to advance.
“I’m getting very little resistance right now to the income tax plan,” Hendren said.
The inclusion in the proposal of a task force to recommend future tax cuts has won over some legislators who previously said the low-income tax cut would not go far enough, including Rep. Charlie Collins, R-Fayetteville, who said last week, “I am on board now with the whole program.”
Tax break for veterans
There is some resistance to another part of the governor’s tax package, a proposal to exempt military retirement benefits from the state income tax and offset the estimated $13 million a year cost by eliminating several existing tax breaks. Some have objected to a provision that would apply the state sales tax to 100 percent of the cost of manufactured housing instead of the current 62 percent.
Senate President Pro Tem Jonathan Dismang, R-Searcy, said last week the existing tax break for manufactured homes is “a carve-out for that particular industry as far as the exemption. I’ve not heard anything else (proposed) that fits the need of the veterans tax cut.”
“We are in the business of setting priorities,” Dismang said. “Is it a greater priority to have an exemption on manufactured homes than veterans’ benefits? That’s what this body has to focus on and decide.”
The proposed exemption for military retirement benefits and offset provisions are contained in HB 1162 by Rep. Charlene Fite, R-Van Buren, and SB 120 by Sen. Jane English, R-North Little Rock.
“Right now, I think there’s support to pass it,” Hendren said. “That one may run in a week or two. We’ll just have to see how it goes.”
House Speaker Jeremy Gillam, R-Judsonia, said last week he had not polled House members to gauge their level of support for the tax proposals, but he said “it does seem that more conversations are being had on the veterans’ bill and the offsets” than on the low-income tax cut.
Gillam said he believed some of the conversations have been about possible alternative offsets, but he did not know whether any would be offered as amendments.
Earned income tax credit
Rep. Warwick Sabin, D-Little Rock, and Sen. Jake Files, R-Fort Smith, have filed HB 1161 and SB 119, matching bills to create an earned income tax credit for low-income working families. The proposal is not part of the governor’s tax plan, but Sabin said last week it deserves a hearing.
“We only meet every two years (for regular sessions), so there’s a limited opportunity to offer these proposals, and to simply push everything aside in favor of one idea as the session is beginning seems like an ineffective way to get consideration for all of the good ideas that might be out there,” he said.
Sabin said earned income tax credits have a proven track record of being able to move people out of poverty, reduce dependency on social services and stimulate the economy. He said he did not know when the bills would be presented in committee.