Memo to Warren Stephens | Arkansas Blog

Wednesday, October 29, 2008

Memo to Warren Stephens

Posted By on Wed, Oct 29, 2008 at 9:17 AM

Poor people do pay taxes. Arkansas is one of the worst when it comes to putting the bite on those below the poverty level. And this doesn't include the federal payroll taxes paid by the lucky ducks making $15,000 a year that Stephens, the Little Rock billionaire, so resents. If they'd chosen better parents, they, too, could be wealthy.

Read on for details on a tax burden some do-gooders hope to ease.

LITTLE ROCK –Arkansas remains among the states that levy income taxes that push poor, working families further into poverty, despite legislators’ efforts in 2007 to reduce the tax bills on those families, according to a report released today by the Center on Budget and Policy Priorities.

The nonprofit, non-partisan research organization identified Arkansas as one of 18 states with an income “tax threshold” below the federal poverty line in 2007. The threshold is the income level at which families begin owing taxes.

Arkansas reduced the tax burden on low-income families in 2007 with the passage of Act 195, which exempted many low-income families from paying state income taxes. However, low-income single parents with two or more children in Arkansas were not treated as favorably in the legislation. They pay the third highest tax in the country for that category.

For example, a single-parent family of three with income at the poverty line — $16,530 in 2007 — could have paid up to $177 in income taxes in Arkansas. That was third-highest in the nation after Hawaii ($316) and Alabama ($303).

“Everyone thought that Act 195 took care of the problem, but there was a flaw in the design of the legislation,” said Rich Huddleston, executive director of Arkansas Advocates for Children and Families. “I hope the oversight was unintentional. In today’s tough economy, our low-income families are struggling more than ever just to pay their bills and make ends meet. We shouldn’t penalize our most economically vulnerable families simply because of their marital status or the number of children they have.”

Huddleston said Act 195 accounted for the costs of raising children by providing a larger tax credit for married couples with more than one child.  But the credit the law provides for single-parent families is the same size, regardless of number of children. Next year, AACF will ask legislators to increase the size of the credit for single-parent families with two or more children, raising the threshold high enough to exempt those families.

AACF will also advocate for a refundable state earned income tax credit to not only eliminate the income tax burden for low-income working families, but help offset other tax burdens placed on the working poor, from payroll tax to sales taxes on groceries and utilities. Twenty-four other states already have EITCs in place.

The CBPP report is available at www.cbpp.org/10-29-08sfp.htm.


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