Now comes Arkansas Advocates for Children with an analysis of HB 1585 by Rep. Charlie Collins, now pending in a House committee. It would phase in new tax brackets for Arkansas’s graduated income tax and, with an eighth-of-a-percent reduction in the top 7 percent bracket, give a multimillion-dollar windfall to some wealthy folks in his neck of the Northwest Arkansas woods.
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According to an analysis by the Institute on Taxation and Economic Policy (ITEP), House Bill 1585 would target personal income tax relief to Arkansas taxpayers who make over $155,000 per year (the top five percent of earners). This group would receive one-half (50 percent) of the total benefits resulting from the tax cut. That’s compared to those who make $29,000 or less per year, who would get nothing.
The richest one percent of Arkansans, those with total incomes of $346,000 or more, would see an average tax cut of $1,275 and would receive over one-fourth (26 percent) of the total benefits of the proposed cut. The next highest four percent, those with incomes between $155,000 and $346,000, would see an average tax cut of $301 and would receive 24 percent of the total benefits.
The bill doesn’t offer many benefits to middle-income Arkansas families. The middle 20 percent of Arkansas taxpayers (those making between $29,900, and $49,000 a year) would see an average tax cut of only $7 — just three percent of the total benefits from the tax cut. The bottom 40 percent of Arkansas taxpayers, those who make less than $29,000, would see no tax cut (on average) and their share of the bill’s benefits would be
There are Republicans who would tell you that OF COURSE the tax-cut bill is disproportionately geared to the high-income. The poor folks are takers, cosseted by free schools and highways and other government handouts. The rich people are job creators — you know those multi-millionaire Walton heirs who slaved long hours for the millions in dividends they receive on inherited stock.
Fairness is one issue. Running state government is another. Says AACF:
The bill raises several important issues. First, given HB 1585’s estimated large state revenue loss of $57 million, can Arkansas afford this bill at the current time, especially given the number of other expensive tax cut bills that appear to have serious momentum at this time (there are bills to reduce sales and use taxes on manufacturers for utilities and for equipment repair, and a bill to reduce capital gains taxes, just to name a couple)? Governor Beebe has already proposed a balanced budget that reins in government spending with no room for tax cuts. Much of the budget, including quality pre-K, child welfare, and juvenile justice programs have already been flat funded in recent years. This bill will only take resources out of the revenue base for future years that are necessary for crucial public services like education, health care, and public safety, that help build the foundation for future economic growth.
There IS a better way. Rep. Warwick Sabin has proposed a revenue neutral way, HB 1926 to make the tax brackets fairer and extend a little tax relief at the same time to couples making up to $244,000 by increasing the standard deduction for nearly everyone and adding a 7.5 percent tax bracket for income above $75,000 (or $150,000 for a married couple filing separately on the same form). He explains: