LITTLE ROCK — Gov. Asa Hutchinson’s proposed $50 million income tax cut for low-income Arkansans cleared a Senate committee Wednesday.
In a voice vote with no dissent, the Senate Revenue and Taxation Committee gave a “do pass” recommendation to Senate Bill 115 by Sen. Jim Hendren, R-Sulphur Springs, the governor’s nephew. The bill goes to the Senate.
The measure would reduce income tax rates for Arkansans earning less than $21,000 a year and would take effect in the 2019 tax year. Tax rates would change 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.
Also in the bill is a provision to create a task force that would make recommendations for future tax reforms by Dec. 1. 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.
Hutchinson, who is expected to announce a re-election bid later this year, has said he wants to push for additional tax relief in two years. His long-term tax-cutting agenda began in 2015 when the Legislature approved his proposal for a $100 million tax cut for middle-income Arkansans.
A bill containing another part of the governor’s tax package, a proposed income tax exemption for military retirement benefits, has been filed but has not yet received a vote in committee.
Sen. Bruce Maloch, D-Magnolia, asked Hendren during Wednesday’s committee meeting if it would make sense to wait to act on the governor’s proposal until later in the session, when the Legislature would have more information about state revenues.
“I prefer the approach, let’s establish what the budget is going to look like and then you can adjust the spending,” Hendren said.
Before the session began, some legislators criticized Hutchinson’s proposed tax cut as too meager. Hendren told reporters Wednesday the bill’s provision to create a task force on future tax reform is widely supported.
“I think a lot of people see the soundness and the logic of taking care of this part of the income ladder at this point, and then I think a lot people also see the wisdom of, before we make large changes that are going to be more expensive on the upper end of the tax code, let’s actually do some due diligence, let’s study it in an organized process,” he said.
Among the senators who voted for the governor’s proposal Wednesday is the committee’s chairman, Sen. Jake Files, R-Fort Smith, who has filed a rival proposal to offer tax relief to low-income Arkansans in the form of an earned income tax credit.
Files said his vote for the governor’s plan does not mean he has given up on the idea of an earned income tax credit.
“It’s worth a hearing,” he said.