Just like that, Gov. Asa Hutchinson's
$100 million income tax cut bill
was approved in a Senate committee this morning.
Benji Hardy says it includes a new amendment, not yet available on-line, pertaining to the capital gains tax
. Is this the delay of the 2013 capital gains tax listed as a possibility as Hutchinson works to make his taxing and spending plans fit circumstances?
: The amendment REPEALS the 2013 capital gains tax cut. It makes a good bill better, said Sen. Bill Sample, who introduced it. It passed without dissension. This is monumental if the House goes along, though it's worth remembering that's where the big capital gains tax cut originated in 2013, with Speaker Davy Carter.
That capital gains tax cut reduced the tax on sale of investments to 50 percent this year and a total elimination of gains over $10 million. The estimated cost this year is almost $21 million.
This would be a progressive step, in that the benefits otherwise would go only to the richest taxpayers and it is a tax break on investment, not labor. The biggest beneficiaries stand to be people who have sold assets acquired at little or no cost, such as Walton family Walmart stock.
Hutchinson's tax bill cuts the tax rate on middle-class taxpayers. Those making more than $21,000 but less than a little more than $35,000 will pay 5 percent rather than 6 percent of taxable income and those making $35,000 to $75,000 will pay 6 rather than 7 percent. As it stands, the top tax rate of 7 percent kicks in around $35,000.
In normal Republican terminology, you could now say Hutchinson's tax cut includes two tax increases.
It delays a cut in the top marginal tax rate from 7 to 6.9 percent adopted in 2013. Conservatives normally frame delayed tax cuts as tax increases.
A repeal of the capital gains tax cut similarly would be termed a tax increase, in that taxpayers now will face a higher rate than put into law in 2013.
I'm not complaining, just observing.
Also: In case you missed it yesterday. I realized an interesting wrinkle about Hutchinson's weird tiered tax plan, which creates multiple sliding scales of tax rates depending on income, rather than a single scale.
It has the quirk of giving a significant tax break to many families with two incomes. You might even say the Hutchinson plan is an encouragement for women to work outside the home.
As I mentioned yesterday: Under Hutchinson's bill, a married couple each making $75,000 can file separately on the same tax form and, thanks to his cuts, pay almost $1,900 less in taxes than a married couple with a single wage earner making $150,000 because they may double up the standard deduction. This advantage of separate filing for double income couples can produce significant benefits in both the big brackets favored by Hutchinson — between $21,000 and $35,000 and $35,000 and $75,000.
Two people making $30,000 would be taxed at 5 percent, not the 6 percent rate applied to a couple with a single earner making $60,000. And so on and on. Wherever two incomes fall below a bracket cliff, even though the combined income would put them in a higher bracket, the filers can take advantage of the lower rate.
Same family income. Different tax rate. The lower income family benefits.
This is pretty unorthodox for a Republican governor.
UPDATE: Just got a copy of Sample's amendment. It simply repeals a reduction of the capital gains tax to 50 percent of the normal tax rate in 2015 and removes the total exemption granted to gains of greater than $10 million.
NOTE: An original post has been edited to remove and clarify some outdated descriptions of the 2013 legislation that I used erroneously.