LITTLE ROCK — A report released Monday by a legislative task force on poverty includes several proposed tax cuts task force members say could help lift Arkansas from having one of the highest poverty rates in the country.
The governor has proposed reducing the sales tax on groceries and said the state cannot afford other tax cuts.
Arkansas had a poverty rate of 18.8 percent in 2009, meaning nearly one in five Arkansans did not have his basic economic needs met, as defined by the federal government. The state rate was 4.5 percent higher than the national average, according to the U.S. Census Bureau. Mississippi was the only state with a higher rate, 21.9 percent.
The Legislative Task Force on Reducing Poverty and Promoting Economic Opportunity report recommends, among other things, expanding healthcare access for the poor, increasing the number of adults with bachelor’s degrees, and increasing funding and access for early childhood education.
The 2010 federal poverty level is an income of $21,756 a year for a family of four. More than 27 percent of the state’s children live in poverty according to the federal standard.
The report found two main flaws in the state’s tax structure.
It states, “Arkansas’ current tax system places a disproportionate share of the tax burden on low-income families” and “the system does not have the capacity to generate the revenues to adequately support critical programs for low-income families.”
Some of the recommendations include:
Altering tax incentive programs, which are used disproportionately by the highest income counties. The report did not include how much this would cost.
Modifying a 2007 law that exempts low-income families with two or more children and two parents from paying state income tax but does not extend the same benefit to single-parent households. The report said such a move would cost the state $3.6 million a year. Also Monday, Rep. Duncan Baird, R-Lowell, filed House Bill 1016, which, if enacted, would allow a single parent with two or more children and making less than the federal poverty levelto pay no state income tax.
Creating a refundable earned income tax credit for state taxes such as exists at the federal level. People who receive an earned income tax credit receive a cash refund if the available credit is greater than the amount they owe in taxes. The report said a state level tax credit equal to 5 percent of the federal credit would cost Arkansas up to $32 million a year.
A task force chairman, state Sen. Joyce Elliott, said she doesn’t know how many of the task force’s recommendations are possible in the state’s current economic climate but said she plans to sponsor legislation dealing with some of them and expects other lawmakers will do the same.
“In so many ways we have policies that exacerbate what’s going on,” said Elliott, D-Little Rock. “So we will just have to take them one by one within the confines of the day’s economic climate.”
Lawmakers have spoken about tax cuts involving the capital-gains tax, the corporate franchise tax, sales tax on used cars, sales tax on groceries, sales tax on manufacturers’ energy and the income taxes of active duty military personnel.
Elliott said consideration of other tax cuts needs to include how they may affect the number of people in Arkansas living below the poverty level.
“Anytime you take money out of the state coffers, that does reduce your ability to address some of the issues that we set forth in this report,” Elliott said.
The executive and legislative branches have been talking about tax cuts aimed at helping a spectrum of people.
Gov. Mike Beebe plans to ask the Legislature to cut the state sales tax on groceries from 2 percent to 1.5 percent and has said it is the only tax cut the state can responsibly make this year. Beebe’s cut is projected to reduce state revenue in 2012 by $20.8 million.
The governor has outlined a $4.59 billion general-revenue budget for fiscal 2012 that holds most agencies’ spending flat and gives a 1 percent increase to be split among the states colleges and universities.
Elliott said Beebe’s statements about no other tax cuts has merit, but she said the task force was “not bound by what his economic forecast was going to look like.”
University of Arkansas at Little Rock Chancellor Joel Anderson called poverty a statewide problem and said removing people from poverty affects the whole state.
“Poverty is one of those things we can do something about. Every time we help someone move up from poverty into the mainstream of life in our state, we do something that makes it possible to advance the whole state,” Anderson said.
According to the U.S. Census Bureau, while poverty levels remain the highest in the eastern and southern parts of the state, the rate of child poverty in Northwest Arkansas rose 5 percentage points between 2006 and 2009 to 25 percent. The region now has the largest number of children living in poverty in the state.
The bureau data also show that while minorities are more likely to be poor - 36.4 percent of blacks, 35.7 percent of Hispanics - by total numbers, twice as many whites are living in poverty.
“So often we think, particularly if we’re white, it’s not our problem, that it’s a problem of minorities. The numbers say something different,” Anderson said.
The data also show that 53 percent of children raised by a single mother are poor.
Arkansas, Pages 10 on 11/30/2010