As predicted here earlier, the House Revenue and Taxation Committee today endorsed Rep. Matthew Shepherd’s HB 1402 to restore all of the 2013 capital gains tax cut, which had been pared slightly as part of Gov. Asa Hutchinson’s income tax cut bill.
It is broadly understood that this bill will be adopted. When fully implemented, it will add another $11 million to the $102 million in income tax cuts already passed.
It’s breathtaking to look at the impact of this bill.
The $102 million in income tax cuts go roughly to taxpayers earning between $21,000 and $75-$80,000. In some families, where there are two earners, that means cuts for couples potentially making as much as $150,000 because in Arkansas married couples may file separately on the same return.
The capital gains tax cut bill restores the 2013 tax cut on sale of assets (unearned income) to 50 percent of the top marginal rate of 7 percent, rather than 40 percent. Thus, a Walton heir who still lived in Arkansas and sold $1 million worth of stock acquired at no cost would pay a 3.5 percent rate on the gain. Somebody who earns $80,000 at hard labor (say a steel mill worker with plenty of overtime) pays at 7 percent on top dollar income. Also under Shepherd’s bill, there’s a a big giveaway to the super wealthy. Gains of over $10 million are entirely free of taxation on the profit over $10 million. Just today I read in the paper of a bank executive who’s sold about $25 million worth of stock this year, all acquired at nominal cost. If the law is passed, he’ll owe no taxes on as much as $15 million of those gains, a break worth a half-million dollars.
But wait, that’s not all.
Asa Hutchinson and the Arkansas legislature will give out $113 million in tax cuts, 10 percent of them to the wealthiest people in Arkansas for their unearned income.
But somewhere between 30 and 40 percent of Arkansas taxpayers — WORKING taxpayers who file returns making less than $21,000 a year will get not a dime of tax breaks.
PS — As expected, a reader offered the uninformed opinion that people who make less than $21,000 don’t pay taxes. I’m hoping to get updated information, but please look at the figures the last time I rounded the information up, for tax year 2010. People in the income categories that get NO tax break paid a whopping tax bill, about $300 million on between 300,000 and 400,000 tax returns.