Both Governor Hutchinson’s tax cut for low-income earners and an alternative low-income tax relief bill calling for an Earned Income Tax Credit advanced on a voice vote in the House Revenue and Tax committee Thursday at the state Capitol.
Both bills are expected to come up for a vote when the full House convenes again on Monday, according to House Speaker Jeremy Gillam (R-Judsonia). It’s also expected that the governor’s tax cut proposal will be voted on in the Senate on Monday.
The bills were presented back-to-back in the House tax committee Thursday. The governor’s proposed $50 million tax cut is projected to benefit the 657,000 Arkansans who earn less then $21,000 a year. The bill also creates a legislative task force on tax reform.
House Majority Leader Matthew Pitsch (R-Fort Smith), the lead sponsor of the House bill outlining the governor’s tax cut proposal, told the House tax committee that the governor has set a priority to decrease taxes for low-income earners.
“If you’re for that, then you’re for this bill. If you aren’t for that, then you’re not for this bill,” Pitsch said.
The second tax relief bill presented calls for an Earned Income Tax Credit based on an individual’s income. A federal EITC has been in place since the 1980s. It provides incentive for work because the credit amount rises as income increases. An Arkansas EITC would create a refundable credit equal to 5 percent of the federal EITC.
“It’s been designed by some very smart people to be as efficient as possible,” Rep. Warwick Sabin (D-Little Rock), lead sponsor of the EITC bill, told the tax committee. “We’re not spending more than we have to on this credit, but we’re certainly achieving the goal of targeting this low-income population and moving them into the workforce.”
According to legislative impact statements released by the Department of Finance and Administration, the governor’s tax plan would reduce general revenue by $25.25 million in FY2019 and by $50.5 million in FY2020. Sabin’s EITC plan would reduce general revenue by $40 million in FY2018.
Representatives from Southern Bancorp, Entergy and Arkansas Advocates for Children and Families testified for the EITC bill. David Ray, the state director for the Arkansas chapter of Americans for Prosperity, testified against it.
Rep. Jim Dotson (R-Bentonville) said he voted for Pitsch’s bill, but he did not vote to advance Sabin’s bill out of committee.
“We’ll see what the House does and the Senate,” Dotson said. “We can’t pass both or we risk doing what Kansas did and really upsetting the apple cart in our state budget.”
Dotson said he doesn’t know what will happen when the full House votes, but he will vote against the EITC in favor of the governor’s plan.
Rep. Charlie Collins (R-Fayetteville) also voted to advance Pitsch’s bill, but not to advance Sabin’s bill.
“I’m not going to support [an EITC], but I would be supportive of sending it to the tax reform task force for consideration as part of a lot of other things,” Collins said.
Rep. Joe Jett (R-Success), chair of the House Revenue and Tax committee, had initially told committee members that he would run the governor’s proposed tax cut proposal this week, while saving all other tax cut bills, including Sabin’s, until the end of the session, but Jett said over the weekend he reflected on that decision and changed his mind.
“I don’t want to start just throwing gasoline right out of the gate and have to deal with that all session long,” Jett said. There are 10 Republicans and 10 Democrats on the House Revenue and Tax committee.
Jett said he voted yes to advance both bills out of committee, but he would not say how he would vote when they come up in the House.
“Something’s going to have to give here,” Jett said. “I’m going to hold judgment and wait and see if they work out some kind of compromise.”
House Speaker Gillam told reporters he was not sure how members would vote on Monday.
“I hear more conversation about the governor’s proposal than I have Rep. Sabin’s proposal at this point, so that would lead me to believe that more than likely that’s where the members will be at,” Gillam said, “but that’s a supposition at this point.”
Gillam said he’s inclined to vote for Pitsch’s bill, but he’ll keep an open mind.
In the Senate, the governor’s proposal is expected to pass on Monday.
“I would be very surprised if it didn't have very broad-base support in the Chamber,” said Senate President Jonathan Dismang (R-Searcy). Dismang says he will vote in support of the governor’s proposal.