As Lindsey reported this morning, the legislature made if official this morning: despite what will likely amount to $100 million in tax cuts — probably including the restoration of capital gains tax cuts benefitting the state’s wealthiest citizens — lawmakers will offer absolutely nothing to the state’s poorest residents, who currently shoulder the highest total tax burden as a percentage of their incomes. Folks making less than $21,000, around a third of filers, just aren’t a priority. Folks making between $17,000 and $30,000 — the second 20 percent of filers — will get an average annual tax break of around three bucks.
Rep. Charlie Collins, just as he did in 2013, said that he liked the idea of giving relief to low-income people conceptually. It’s funny, he keeps saying that, but he never manages to propose any tax bills that would benefit low-income people and he always votes against bills which give tax relief to the poor. This isn’t surprising: he believes that tax cuts for the rich (sorry, “job creators”) are more important. Again, it’s about priorities.
Collins said that instead of establishing a state version of the earned income tax credit, it would be better to offer the same size tax break but instead incrementally reduce the marginal income tax rates below $21,000. If one’s goal is to help the working poor, this alternative makes no sense. Even if you’re cutting a tenth of a percentage point for all marginal rates below $21,000, that would amount to a tax cut of around $20 for someone making $21,000 (and a $20 cut for the rich too, since they get the benefit of a cut to marginal rates on the first $21,000 as well). Or $12 for someone making $12,000. Collins says this is supply side economics. He argued with a straight face that the poor would be more incentivized to work by this hypothetical tax break. Sorry, but that’s bananas. Whatever you might think of the Laffer curve, that’s simply a laugher: no one has ever seriously argued that someone is going to decide whether or not to seek a $10 an hour job based on a difference in paycheck take-home pay of pennies.
The earned income tax credit instead targets significant financial relief to those who have chosen to work and are are at the bottom of the pay scale. It has a long empirical history of stimulating the economy and helping to lift people out of poverty and it could impact 40 to 50 percent of the state’s filers, not just low-income folks but moderate-income working families as well. As Sabin testified, under his bill, a working family with a couple of kids making between $20,000 and $30,000 could be eligible for additional tax credits of $300. Collins is so committed to ideological abstraction that he wants to devote the same amount of funds to instead produce a negligible impact. Well, I should say he claims to want to. The truth is that any dollar of tax relief for the poor is one less dollar of tax cuts for the rich. That’s why Collins hasn’t proposed a bill to cut taxes on the poor, not even one based on the half-baked, nonsensical theory he peddled in committee today. Again, it’s about priorities.
Various Republicans lawmakers were shocked and appalled at the notion that a low-income, working Arkansan could end up with a tax credits exceeding what they owe, meaning in practice that the state is giving them funds (this is precisely how refundable tax credits operate and already happens with the successful, bipartisan federal EITC, but never mind). As a matter of fairness, it’s worth pointing out once again that when you look at the total state and local taxes paid people pay, including sales taxes, the poorest 20 percent of Arkansas taxpayers pay the highest percentage of their income in taxes, so a credit that goes above income tax liability is actually adding balance to that picture.
Rep. Stephen Meeks said that he simply didn’t like the idea of taxpayers receiving tax credit payments from other taxpayers. This is curious, since the state has dozens of economic development and business incentive tax credits that amount to direct state expenditures of hundreds of millions of dollars, paid for by taxpayers, to corporations. For whatever reason, that kind of tax credit is okay, just not tax credits for the poor. Last time: it’s about priorities.