Rep. Warwick Sabin (D-Little Rock) has filed alternative legislation to Governor Hutchinson’s proposed $50 million tax cut on Arkansans who earn less than $21,000. The Working Families Opportunity Act would establish a state Earned Income Tax Credit.
“I strongly believe that the Earned Income Tax Credit is a more effective way to deliver tax relief to lower income Arkansans,” Sabin said. “It really helps move people out of poverty. It helps remove dependence on social services.”
Sen. Jake Files (R-Fort Smith), who chairs the Senate Revenue and Tax Committee has filed the same bill in the Senate. Rep. Joe Jett (R-Success), chair of the House Revenue and Tax Committee, has agreed to be added to the bill as a co-sponsor, according to Sabin. Sabin filed similar legislation during the 90th General Assembly in 2015.
A federal EITC has been in place since the 1980s and was championed by President Ronald Reagan. The EITC provides an incentive for work because the credit amount rises as income increases.
The Working Families Opportunity Act would create a refundable credit equal to 5 percent of the federal EITC.
Rep. Charlie Collins (R-Fayetteville) said he opposes an Arkansas EITC.
“It is the best way of giving welfare. We’re acting like it’s a new improved method for doing an old broken thing, but we insist on keeping the old broken thing going at full bore … while we also bring in a new pretty machine and say pay for that too.”
“The Earned Income Tax Credit has no chance to get out of this assembly,” Sen. Bart Hester (R-Cave Springs) said. “We’re already doing a tax cut for the lower income workers and at some point everybody’s got to have skin in the game somewhere.”
Collins said he is open to the governor’s proposed legislative task force on tax reform taking up the topic of how to reform and restructure taxes and welfare, including an EITC.
Twenty-six states plus the District of Columbia have established their own EITCs, according to the Center on Budget and Policy Priorities.