Rep. Joe Jett, chair of the House Revenue and Taxation Committee, filed a shell income tax bill today that he says will soon be amended to fully restore the 2013 capital gains tax cut.
In the $102 million income tax cut bill passed by Gov. Asa Hutchinson, the legislature partially rolled back the 2013 capital gains tax, paid primarily by wealthy taxpayers.
The 2013 bill eliminated the tax
entirely on all gains — sale of assets such as property and stock — over $10 million. It also cut the capital gains deduction from 30 percent of the normal income tax rate — to 4.9 percent in the top income bracket — to 50 percent, or a 3.5 percent top tax rate. The Hutchinson tax cut eliminated the $10 million exemption and trimmed the discount to 40 percent of the top bracket, leaving an effective rate of 4.2 percent.
Jett says the 2013 cut will be fully restored by the amendment, both the $10 million exemption and the 50 percent deduction. This will cost at least $10 million in lost revenue a year (more in years of significant company sales). It will be offered if revised revenue projections — expected soon — show sufficient revenue growth to pay for the cut without reducing other state agency spending. Many agencies are looking at cuts in the budget this year.
Other Democrats have been talking about a tax bill with benefit for low-income workers. Hutchinson gave a tax cut to people making $21,000 to $75,000, but nothing for those above or below, as he noted in a press conference last week. Now the wealthy have been taken care of, but still nothing for the 40 percent of Arkansas taxpayers who make less than $21,000. You can make $10 an hour and not make $21,000 in a year. That income is sufficient to disqualify a worker for all state-supplied so-called “welfare” programs. Hutchinson justified leaving poor workers out of his tax cut because they receive other benefits. Some do, but by no means all. About 20 percent of Arkansas workers earn between $17,000 and $30,000. Their average benefit from the Hutchinson tax cut is $3. For those with big gans, the savings pile up at $3.50 per thousand in capital gains, or $35,000 per million; $70,000 per million in the uppermost bracket.
CLARIFICATION: Elwood points out (see comments) that the language on the $10 million total exemption likely refers to the amount over $10 million in gains, not the first $10 million of that gain, which would only see a $350,000 tax break if the exemption is revived.