LITTLE ROCK — The House Revenue and Taxation Committee on Thursday approved two competing bills that would provide tax relief to low-income Arkansans.
In voice votes, the panel gave “do pass” recommendations to House Bill 1159 by Rep. Mathew Pitsch, R-Fort Smith, which contains Gov. Asa Hutchinson’s proposal to reduce tax rates for low-income Arkansans, and HB 1161 by Rep. Warwick Sabin, D-Little Rock, which would create an earned-income tax credit targeting the working poor.
The Republican governor’s proposal cleared the committee — which is evenly divided between Republicans and Democrats — in a voice vote with no dissent. Sabin’s bill passed in a voice vote with several “no” votes heard. Both bills go to the House.
Pitsch told the committee the governor’s proposal, which would take effect in the 2019 tax year, would provide tax relief to about 650,000 Arkansans who earn between zero and $21,000 a year. He said that combined with an income tax cut for middle-income Arkansans that was approved in 2015, passage of the measure would mean tax relief for 1.3 million of the state’s 1.5 million taxpayers.
A provision in the bill would create a legislative task force that would make recommendations for future tax reforms no later than Dec. 1.
The task force would “work on what tax reform in the state of Arkansas can do to create better economic opportunities, job creation, a better way and a better path for our citizens,” said Pitsch, the House majority leader.
Rep. Vivian Flowers, D-Pine Bluff, asked Pitsch if the Legislature should be “even discussing a tax cut at this time, with issues like transportation, or highways rather, not being fully addressed, (or) teacher retirement, or without knowing exactly what our budget is going to look like, given that we don’t know what is going to happen to the Affordable Care Act?”
Pitsch said, “I guess you could say we have yet not voted on other things, but this is (the governor’s) priority. He wants this tax cut. We want a tax cut for our citizens, I believe, so we’ll take that. And that’s what we’re doing here: We’re setting a priority.”
Sabin told the panel his proposal would allow a working Arkansas taxpayer who qualifies for the federal earned-income tax credit to receive a state credit equal to 5 percent of the federal credit. The amount of the credit a person receives would increase as the person’s income level increases, up to a certain point.
Sabin said his plan, which would take effect July 1, would cost the state about $40 million a year, compared to $50.5 million a year for the governor’s plan.
“It’s really the most effective way that we’ve seen to, No. 1, incentivize work, No. 2, move people out of poverty, No. 3, reduce dependency on social services, and No. 4, stimulate the economy,” Sabin said.
Representatives of Southern Bancorp, Entergy and Arkansas Advocates for Children and Families testified in support of the bill, saying it has a proven track record of success.
David Ray, state president of Americans for Prosperity, testified against the bill, saying that because the credits can result in taxpayers receiving tax refund checks, the program is more susceptible to fraud than a reduction in tax rates.
The committee’s chairman, Rep. Joe Jett, R-Success, a co-sponsor of Sabin’s bill, told reporters after the meeting he voted for both bills. He said he does not expect both to become law and said there is hoping to see a compromise reached.
“My hopes would be the governor and Representative Sabin would get together, sit down, work through the process and see if we cannot come to some general consensus of how we can work through this,” Jett said.
House Minority Leader Michael John Gray, D-Augusta, who supports Sabin’s proposal, said after the meeting he hopes the House will not vote along party lines but will “move past that and look to what the better policy is.”
Republicans control 76 seats in the 100-member House.
Hutchinson issued a statement Thursday that did not suggest an interest in compromising.
“I am pleased with our tax package as is,” he said in the statement. “Our $50 million tax cut provides simple and straightforward relief for more than 600,000 low-income Arkansans and continues my focus on reducing the state’s income tax rate. It’s the right thing to do, and, as such, it continues to generate a great deal of support from both sides, as indicated by the quick passage in both committees.”
Matching Senate versions of both tax bills have been filed. The Senate version of the governor’s proposal, Senate Bill 115 by Sen. Jim Hendren, R-Sulphur Springs, cleared the Senate tax committee Wednesday and is expected to receive a vote in the Senate floor next week.
Sen. Jake Files, R-Fort Smith, has not yet presented the Senate version of Sabin’s proposal, SB 119, in committee.