Bill introduced for tax credit for working poor | Arkansas Blog

Tuesday, February 10, 2015

Bill introduced for tax credit for working poor

Posted By on Tue, Feb 10, 2015 at 11:28 AM

Rep. Warwick Sabin, a Little Rock Democrat, has introduced a bill to give an income tax break to the working poor.

It's the functional equivalent of a state earned income tax credit, though it is styled the "working families opportunity credit."

It would rebate to taxpayers a percentage of the federal earned income tax credit and be implemented on a sliding scale beginning at 1.25 percent of the credit for tax year 2015, then 2.5 percent for 2016 and 5 percent for years after.

In Arkansas,. 20 percent of Arkansas tax filers make less than $17,000 and another 20 percent make less than $30,000.

The federal tax credit phases out at $14,590 for a single person; $20,020 for a married couple with no children and at rising amounts for additional children that top out at $52,427 for a married couple filing jointly with three or more qualifying children.

The credit, which amounts to a refund of a portion of payroll taxes, is limited to $496 for a filer with no children and up to $6,143 for a taxpayer with three or more qualifying children and the highest eligibile income. That would make the ultimate state tax credit in 2017 a bit more than $300 for families at the top of the income eligibility with three or more children.

No revenue impact report has been filed yet on the state credit.

Gov. Asa Hutchinson's income tax cut was focused on those making $21,000 and $75,000. But it also preserved part of a 2013 capital gains tax cut which predominantly benefits wealthier taxpayers. As I reported yesterday, legislation has been introduced to re\instate all of the 2013 capital gains tax cut, including the end of taxation of that portion of gains over $10 million, plus a 50 percent reduction in gains below that. With passage of that bill, only the poorest workers would not benefit from Hutchinson's tax reductions.

Asked about omisson of benefits for poor workers, Hutchinson said they get welfare programs. But Income cutoffs for things like the tax credit, the Medicaid expansion under Obamacare, food stamps and other benefits are not available to thousands of people making less than $21,000.

Since the House Revenue and Taxation Committee is chaired by a Democrat, Rep. Joe Jett, maybe Sabin will get a vote on his bill to provide a measure of relief to low-income working people. Will he get a Republican vote after the committee approves a tax break for people selling assets worth more than $10 million in profit? Or will they take the Hutchinson view that the rich with unearned income are more deserving of assistance than the working poor?

UPDATE: About 279,000 families receive the federal credit. They already pay a bigger percentage of their income in taxes than top-tier taxpayers. The credit would fill the gap for people left out of Hutchinson's tax cut. The credit goes only to those who work and the credit increases based on working income.

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