House committee preserves tax cut for the wealthy | Arkansas Blog

Tuesday, February 12, 2019

House committee preserves tax cut for the wealthy

Posted By on Tue, Feb 12, 2019 at 11:06 AM

click to enlarge DEFENDS TAX CUT FOR RICH: Rep. Joe Jett.
  • DEFENDS TAX CUT FOR RICH: Rep. Joe Jett.
The House Revenue and Taxation Committee rebuffed a Democratic effort to strip the governor's income tax reduction bill of a huge break for the richest 1 percent and then sent the bill to the floor after hearing critical testimony.

Rep. Charles Blake (D-Little Rock) proposed the same amendment Sen. Will Bond failed to add in the Senate — preserving the top marginal tax rate of 6.9 percent for the 11,000 or so taxpayers making more than $456,000 a year. He got few questions, little debate and the amendment was defeated in a voice vote, as expected.

The tax, when fully implemented over two years, will cut revenue by $97 million, with $73 million going to the richest 1 percent. The Institute for Taxation and Economic Policy has estimated the actual cost, given inflation and income growth, will be $150 million or more.

Blake noted middle-income taxpayers will gain about $6 from the tax cut and the average gain for the top 1 percent will be almost $8,000.

Sen. Jon Dismang, the sponsor, was asked for evidence that saving rich people several thousand dollars would attract business to Arkansas. He said he would not "promise buses" of businesses coming to Arkansas, but he said a lower tax rate would be helpful to people gauging where to locate. Rep. Joe Jett also said the tax cut would make Arkansas more competitive with surrounding states.

Rep. Dan Douglas asked how the tax cut would be paid for. Jett said revenue growth and savings from the governor's "transformation" plan would provide the money.

Jett, once a Democrat but now a Republican, defended the cut by saying lower-income people already got tax cuts.  He didn't mention the cumulative impact of $150 million, an amount for about 1 million taxpayers equivalent to what this bill seems likely to give 11,000 taxpayers.

Jett said the bill was not ideal. He noted he'd supported different approaches in the past, but said this was a step in the right direction.

Randy Zook, director of the Arkansas State Chamber of Commerce, said the business lobby supported the legislation "100 percent." He said it would be particularly valuable to "pass-through" businesses where earnings are directly taxed as personal income. "This is a good thing for the business climate in Arkansas," he said.

Bill Kopsky of the Arkansas Citizens First Congress makes Arkansas's "upside down" tax system — with its heavy impact on the poor — worse. Low-income people pay 11 percent of income in taxes and the wealthy pay 5 percent. "This bill does nothing but make that worse," he said. He emphasized the benefits to the state of pre-K and other education programs that would make the state more competitive.

It's irresponsible, he said, to say a single tax makes the state competitive when there's a "whole milieu" of issues that others see in Arkansas when evaluating it as a place to live.

Scharmel Roussel of Little Rock testified against the bill, noting that the poor must live in a month on income the rich take home for a day. Instead of giving a tax break to the wealthiest, she said the legislature should give an earned income tax credit to the working poor.

Rev. Gail Brooks of the Canvas Community Church in downtown Little Rock talked of its mission to provide shelter and food. Such people won't be affected by a tax bill directly, but she said they will be affected by a loss of money for services that could help them. "We have so many more needs that we need to be funding" than to provide tax cuts for those who have plenty, she said. She was challenged by Rep. Jim Wooten (R-Beebe) who said he sensed "resentment" to those who'd "worked hard" and succeeded. He said he'd been told by a lawyer of someone who was leaving Arkansas because of the tax rate.

Barry Haas of Little Rock said the bill harms the state and continues a "rigged" tax system that's unfair to the "vast majority of Arkansans." He said the money will go mostly to people who have more money than they can spend in a lifetime and it will mostly go to investments out of state. Put money in poor people's hands and they'll spend it in Arkansas, he said. I ask that you think of all the citizens of Arkansas not just those who already have far more than they need." He noted, too, that the income cut tax bill comes the day after release of a highway plan that continues a sales tax and and adds a sales tax on fuel. He said he doubted anyone will bring up in discussing that bill how high Arkansas rates in income tax rates.

Haas was ripped for "slamming" people  — "evil rich people," she said — who'd been successful by Rep. Robin Lundstrum. She said the rich gave generously. Haas said she'd mischaracterized his comments. He said he was only advocating fairness.

Josh Waters of the nonprofit and ultraconservative Conduit for Action said he supported the bill because it would "shrink the size of government" through a tax cut and no additional spending. (Which, ironically, is a point made by many opponents.)

Jett, in closing for the bill, said he expected spirited debate and said he, too, had an interest in supporting services, including pre-K and UAMS. He emphasized that the first year of the plan would cost only $25 million.

The bill passed out of committee on a roll call vote, 15-2 (Democrats Hodges and McCullough), with three not voting. 

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