The House Committee on Revenue and Taxation will take up Rep. Warwick Sabin‘s bill this morning to offer tax credits to low-income Arkansans. The Working Families Opportunities Act (WFOA) would give additional relief to 279,000 working Arkansans who already qualify for the federal Earned Income Tax Credit: the state would fund a tax credit amounting to an additional 1.25 percent of the EITC amount received in 2016, 2.5 percent in 2017, and 5 percent in 2018.
Taxes in Arkansas are regressive — factoring in all state and local taxes, the poorest twenty percent of Arkansans pay the highest percentage of their income, about twice as much for every dollar they earn than the state’s richest twenty percent. The WFOA would help restore some balance and provide relief to the folks that need it the most.
And the Arkansas legislature loves tax relief. Right? After all, they’ve passed more than $100 million in tax cuts! Well, not a penny of that went to the hundreds of thousands of taxpayers—roughly a third of filers—making less than $21,000. And remember, the lost revenue jeopardizes funding for social programs to help the poor.
Hutchinson’s tax cuts did make the Arkansas tax system relatively more progressive, but in addition to ignoring the working poor, those with moderate incomes got only a paltry benefit. The second 20 percent (those making between $17,000 and $30,000) got an average tax reduction of three bucks. The middle 20 percent ($30,000 to $50,000) did a little better, with an average tax reduction of $39.
Sabin told KUAR:
The tax cut that we passed earlier in this legislative session was targeted to the middle class but the truth is everybody making between $21,000 and $30,000 a year are probably getting about a $3 benefit from that.
For a working family with a couple of kids, making anywhere between $20,000 and $30,000 a year, they may get an extra tax credit of about $300.
Saint Ronald Reagan, as Sabin pointed out in a Talk Business op-ed, called the federal EITC “the best anti-poverty, the best pro-family, the best job creation measure to come out of Congress” so you’d think GOPs would be open to the idea of a state version. But there’s only so much money in the state pot and Arkansas Republicans have been resistant to giving relief to poor or moderate income people because it might threaten their ability to lavish tax cuts on the rich. A similar bill was dead in the water in committee in 2013. Rep. Charlie Collins told KUAR that capital gains taxes for the “job creating class” were a more important priority than relief for working people trying to scrape by and then he started grinning maniacally like Mr. Burns. Okay, I made that last part up. But he did say: “I don’t…believe that at the present time the money exists in the balanced budget to do that but theoretically and conceptually, and in the future I’d love to do that kind of a bill.”
Funny how relief for poor folks remains theoretical and conceptual, while that “job creating class” manages to get their goodies in the real, material here and now. Well, it’s just a matter of priorities, isn’t it?
Sabin’s bill faces an uphill battle but he’s gotten the co-chairs of the House and Senate Revenue and Tax Committees, Rep. Joe Jett (a Democrat) and Sen. Jake Files (a Republican) to sign on as co-sponsors so maybe it has a fighting chance to get out of committee.
Who might benefit from Sabin’s plan? Here are the qualifying thresholds for the EITC:
$14,340 ($19,680 married filing jointly) with no qualifying children;
$37,870 ($43,210 married filing jointly) with one qualifying child;
$43,038 ($48,378 married filing jointly) with two qualifying children;
$46,227 ($51,567 married filing jointly) with three or more qualifying children.