As Arkansas lawmakers work toward a package of about $100 million in tax cuts, the House Revenue and Tax Committee approved an income tax cut Tuesday that state finance officials say would cost the state about $57 million a year.
Representative Charlie Collins, a Republican from Fayetteville, says Arkansas workers are at a disadvantage to those in surrounding states in regards to how much they pay on income taxes.
“One of those disadvantages is the fact that our top rate on incomes of 7 percent is higher than every state that borders us and dramatically higher than several,” Collins told the committee.
He says elimination of the income tax isn't possible in the short term, but reducing it will make Arkansas a more competitive place for attracting jobs in the future.
Tim Leathers of the Department of Finance and Administration told the committee that the income tax cut would require budget cuts.
“Anything that we do is going to cause an adjustment somewhere else to be made somewhere down the line when we get in the budget and those are the things we ask you to keep in mind and your being consistent about that down here,” Leathers said.
Rich Huddleston, Director of Arkansas Advocates for Children and Families spoke against the bill. He says the proposed cuts would make the tax system less fair to the state’s lowest earners who he says pay twice as high a percentage of their total income as do the state’s wealthiest earners.
“It’s totally a matter of misplaced priorities when the legislature is passing out tax cuts for wealthy earners while at the same time rejecting tax relief for low and middle income families and putting essential services at risk for the populations that need them the most,” Huddleston said after the meeting.
Also after the meeting, Governor Mike Beebe wouldn’t speak to any specific tax cut proposals, only reiterating that for him to put support behind any tax cuts, lawmakers would have to offset them through Medicaid expansion or by identifying which services they want to cut.
“I am supportive of looking at tax cuts if we can pay for them and right now the only way I know we can pay for them is if you do Medicaid expansion or private option or whatever you want to call it. Otherwise, if you do tax cuts without that, you’re cutting into a lot of essential services,” Beebe said.
Speaking to reporters Collins said he has ideas about where in the state’s budget cuts could come from but wouldn't name specifics saying that would be part of the larger discussion surrounding the state’s Revenue Stabilization Act, or main budget bill, closer to the conclusion of the session.
The bill now goes to the House for a vote.
The House Revenue and Tax committee met later Tuesday afternoon to approve a bill that would cut the state's capital gains tax which is leveed on earnings from investments. That tax cut is sponsored by Speaker of the House Davy Carter, a Republican from Cabot.