Favorite

An Arkansas EITC 

Half the states now have a state Earned Income Tax Credit (EITC), reinforcing the benefit to the working poor provided by the federal EITC in place since the mid-1970s. Despite efforts in recent years in Arkansas, a state EITC has not been created here, though a flurry of other laws have provided tax cuts benefitting higher-earning Arkansans. There are some signs that the time may be ripe for a real discussion about the creation of an Arkansas EITC. It's a policy change that makes sense in terms of economic benefit to the working poor and to the state as a whole.

The EITC is that rare bipartisan tax provision. Progressives like the EITC because of its impact in cutting poverty and in lessening inequality, citing the fact that each year approximately 6 million Americans (over half of them children) are propelled above the poverty line annually by the federal tax credit. Indeed, many contend that the real secret to dramatic poverty reduction in the United States during the Clinton administration was not the better-known 1996 welfare reform legislation, but was instead the significant expansion of the EITC included in Clinton's 1993 deficit-reduction legislation. While some grumble (cue Mitt Romney's "47 percent" comments) that the federal EITC means that a significant portion of Americans who receive government benefits pay no out-of-pocket taxes, many conservatives are drawn to it because of its explicit rewarding of work and family; President Reagan called the federal EITC "the best anti-poverty, the best pro-family, the best job creation measure to come out of Congress."

State EITCs typically are set at a fixed percentage of the federal credit that takes into account workers' income and number of dependents (it now nears $6,000 for a poor family with three or more children), making it relatively easy to administer. In almost all cases, as in the federal program, states allow taxpayers to actually receive a refund that can immediately be used to take care of their family's pressing economic needs. Such families are not just living "paycheck to paycheck," but instead are too often living "payday lender to payday lender." Thus, the benefits from an EITC (federal or state) are typically plowed right back into the economy, unlike tax cuts for wealthier individuals or for corporations. As a result, with the economy healthier and state budgets more flush, more states are looking at adding EITCs.

The primary legislative proponent of an Arkansas EITC, Rep. Warwick Sabin (D-Little Rock), will definitely introduce his "Working Families Opportunities Act" again. The question is whether that will be in the 2016 fiscal session or in the 2017 full session. Sabin knows he needs visible Republican support in the GOP-controlled legislature to have any chance of moving the legislation. Moreover, it is crucial that the state EITC be reframed from a benefit to the poor to a benefit to the broader Arkansas economy. Support from the business lobby becomes vital to that reframing. Corporations such as Entergy (which knows working families often have to make choices between paying an energy bill and buying food) and Walmart (from which many EITC beneficiaries purchase the necessities of life) have in recent years promoted (and hosted) free tax preparation services for the working poor to help them gain the federal EITC. The question is whether that charitable spirit will morph into lobbying support for a state EITC.

The creation of an Arkansas EITC makes particular sense for two reasons. Because of the large percentage of Arkansans, especially kids, living at or near the poverty line, a state EITC here would have immediate impact on hundreds of thousands of Arkansans, much like the private option. Moreover, Arkansas's overall tax system is graded the 11th most regressive in the nation by the Institute on Taxation and Economic Policy.

The price tag on an Arkansas version of the EITC is not inconsequential — up to $70 million annually (depending upon the percentage of the federal EITC employed*) in a tight budget. However, as Ernie Dumas wrote last week, there will be concern about any increase in a gas tax that must be at the heart of a new roads program for the state. A state EITC could partly balance out the impact of a gas tax both in terms of the tax increase itself as well as its regressive nature. The passage of an Arkansas EITC remains a long shot, but the pay off would be a significant one for the state.

*This parenthetical was added to an earlier version of this column.
Favorite

Speaking of Earned Income Tax Credit, Warwick Sabin

  • The rich get richer: IRS enforcement

    December 12, 2018
    If recent tax cuts overwhelmingly favor the rich (and they do) shouldn't tax law enforcement also favor the rich? It does, says a report from Pro Publica. /more/
  • Predictions anyone? A couple of Arkansas races of interest

    November 6, 2018
    Many races locally and nationally are of interest, of course, but two Arkansas election contests are particularly interesting to me because I just don't have a clue how they'll turn out: /more/
  • City hall campaign bookkeeping: a fix on mayor's race, more study needed on Ward 2

    November 5, 2018
    The Arkansas Democrat-Gazette today summarized campaign spending on races for Little Rock city board and mayor and, in the process, fixed an earlier misunderstanding about the mayor's race but only added to the fog about a city board race. /more/
  • The greatest story never told in Little Rock media: Out of control Little Rock police

    November 3, 2018
    Does a falling tree make a sound if there's no one in the forest? Do police continue to get away with sloppy, abusive or otherwise questionable practices if nobody knows about them? Recent exposures of the Little Rock Police Department naturally raise the question /more/
  • The attack on teachers started in 2017. Joyce Elliott tried to slow the train. Warwick Sabin voted against her.

    November 3, 2018
    Sen. Joyce Elliott has provided on Facebook some background on the omnibus education legislation of 2017 that gave Education Commissioner Johnny Key the ability to waive state law so that he could fire at will select Little Rock school teachers — all at 22 majority black and poor schools.  She challenged the law change at the time, including questions about teacher fair dismissal, but the law passed primarily with Republican report and a notable Democratic exception in Little Rock, Rep. Warwick Sabin. /more/
  • Tough choice for Little Rock mayor

    October 25, 2018
    To date, I've remained neutral in the Little Rock mayor's race for a number of reasons. As I was involved in both independent survey work in the race and in the planning for a series of five mayoral forums, I wanted to wait until after those activities were complete to take any stance. More importantly, I really wanted to watch the campaign play itself out. I wanted to see how the candidates that I know well performed through the pressure of a campaign. In the end, I've decided that Warwick Sabin is best positioned to be the kind of mayor that Little Rock needs at this vital time in our city's history. /more/
  • Kurrus, Sabin object to Johnny Key's attack on LR school teachers UPDATE

    October 23, 2018
    Baker Kurrus and State Rep. Warwick Sabin, candidates for Little Rock mayor, have jumped in on Education Commissioner Johnny Key's rejection of a teacher contract that doesn't allow firing teachers at will.  Both raise questions about waiving state law as the first means to address school improvement, Kurrus most pointedly, with references to the charter school drain encouraged by Key and the unfairness of singling out Little Rock schools for this. UPDATED WEDNESDAY with Frank Scott comment. /more/
  • Little Rock mayoral candidates square off in forum

    October 16, 2018
    If Frank Scott's candidacy speaks to the hope of bridging racial divides, Baker Kurrus' message of centrist unity seems intended to appeal to those weary of partisan conflict. Sabin, meanwhile, hopes to capitalize on the big turnout among progressives expected this cycle. /more/
  • Sabin, Scott, Kurrus speak out LRPD drug raids; city officials mostly go into hiding

    October 15, 2018
    State Rep. Warwick Sabin, one of five candidates for Little Rock mayor, has spoken up on the Washington Post report on questionable drug raids by Little Rock police. /more/
  • Candidates address community policing at Philander debate

    October 12, 2018
    Incisive and sometimes confrontational questions about race relations were asked of four of Little Rock’s five mayoral candidates — Baker Kurrus, Vincent Tolliver, Warwick Sabin and Frank Scott Jr. — at last night's debate Thursday evening sponsored by Little Rock's Racial and Cultural Diversity Commission (RCDC). /more/
  • More »

Comments

Subscribe to this thread:

Add a comment

More by Jay Barth

  • Can the NRA survive?

    Make no mistake: Advocacy for the expansion of gun rights will remain vibrant in the United States. The suddenly relevant question is whether the National Rifle Association — the nation's largest and politically potent gun rights group for decades — will be at the head of that movement, thanks to the NRA's increasingly visible role in the relationship between the Russian government and the 2016 Trump campaign.
    • Dec 20, 2018
  • Cotton and crime

    The debate over what would be the sole consequential, bipartisan legislation of the first two years of the Trump presidency is underway in the U.S. Senate, and Arkansas's high-profile junior Sen. Tom Cotton has placed himself at the center of it.
    • Dec 6, 2018
  • 2018: Complicated

    The last two election cycles redefined Arkansas politics. In 2014, the three distinguishing elements of Arkansas's politics — provincialism, personalism and populism — with roots back to the McMath era of the middle of the 20th century, died simultaneously as a Tom Cotton-style Republicanism roared into dominance in the state.
    • Nov 22, 2018
  • More »

Latest in Jay Barth

  • Can the NRA survive?

    Make no mistake: Advocacy for the expansion of gun rights will remain vibrant in the United States. The suddenly relevant question is whether the National Rifle Association — the nation's largest and politically potent gun rights group for decades — will be at the head of that movement, thanks to the NRA's increasingly visible role in the relationship between the Russian government and the 2016 Trump campaign.
    • Dec 20, 2018
  • Cotton and crime

    The debate over what would be the sole consequential, bipartisan legislation of the first two years of the Trump presidency is underway in the U.S. Senate, and Arkansas's high-profile junior Sen. Tom Cotton has placed himself at the center of it.
    • Dec 6, 2018
  • 2018: Complicated

    The last two election cycles redefined Arkansas politics. In 2014, the three distinguishing elements of Arkansas's politics — provincialism, personalism and populism — with roots back to the McMath era of the middle of the 20th century, died simultaneously as a Tom Cotton-style Republicanism roared into dominance in the state.
    • Nov 22, 2018
  • More »

Most Viewed

  • Of Freud and foolishness

    I’ve been suspicious of psychologists bearing theories ever since my graduate school "Eureka!" about Freud and Dostoyevsky.

Most Recent Comments

  • Re: Of Freud and foolishness

    • Wondering what my name would be if not for Jonathan Swift. Probably Pamela.

    • on January 15, 2019
  • Re: Of Freud and foolishness

    • i would not necessarily regard this correlation as evidence of 'toxic' effects, but some years…

    • on January 15, 2019
  • Re: Of Freud and foolishness

    • I can only speak for myself; but, it seems that I was never quite so…

    • on January 15, 2019
 

© 2019 Arkansas Times | 201 East Markham, Suite 200, Little Rock, AR 72201
Powered by Foundation