The Arkansas Senate on Monday rejected an attempt to recall from the state House of Representatives a bill approved by the Senate on Thursday that would cut income tax rates for Arkansans with annual taxable incomes between $21,000 and $75,000 and repeal capital-gains income tax cuts approved in 2013.
The House Revenue and Taxation Committee's members huddled privately later in the day to discuss changes to the legislation that would temporarily delay and trim parts of the repeal of the capital-gains income tax cuts. The committee is likely to consider adopting these changes to the bill this morning, said committee Chairman Joe Jett, D-Success.
The legislation is Senate Bill 6 by Senate President Pro Tempore Jonathan Dismang, R-Searcy.
If SB6 becomes law, the income tax rate for Arkansans with taxable incomes of between $21,000 and $75,000 would drop from 6 percent to 5 percent on their incomes between $21,000 and $35,099, starting next year. The rate on incomes between $35,100 and $75,000 would fall from 7 percent to 6 percent.
Among other things, SB6 also repeals Act 1488 of 2013, which increased the capital-gains exclusion from the state income tax from 30 percent to 50 percent, starting this tax year. Act 1488 also provided an income-tax exemption for that part of capital gains received by a taxpayer in excess of $10 million starting last tax year. The law would be repealed retroactive to Jan. 1 of this year.
Jett late Monday afternoon released a copy of a proposed amendment drafted for Dismang and House Speaker Jeremy Gillam, R-Judsonia, the House sponsor of SB6. The amendment would exclude 50 percent of net capital gains from income taxes from Jan. 1-Jan. 31 of this year, and then the exclusion would be cut to 40 percent starting on Feb. 1 of this year.
Jett said he expects the House Revenue and Taxation Committee to vote on the amendment this morning if the committee's members received a copy of Gov. Asa Hutchinson's proposed fiscal 2016 budget to review Monday night.
He said he expects the House committee to adopt the proposed amendment to SB6. "I'd hate to try to get the thing out of committee without the amendment on there. There is a lot of heartburn [about the capital-gains tax cut repeal] without the amendment."
SB6 would reduce state general revenue by $12 million in fiscal 2016 and by $102.8 million in fiscal 2017, according to the state Department of Finance and Administration. But Jett said the proposed amendment would likely reduce state general revenue by roughly $9 million or $10 million more a year.
When asked about the proposed amendment, Hutchinson said in a written statement that "my budget will be based upon the middle class tax cut passed by the Senate.
"Any amendment offered on the House side will need to be considered based upon its budget impact," said Hutchinson, who is scheduled to release his proposed fiscal 2016 budget this morning to the Joint Budget Committee.
Earlier Monday afternoon, the Senate voted 6-24 to defeat a motion by Sen. Linda Collins-Smith, R-Pocahontas, to recall SB6 from the state House of Representatives.
Collins-Smith urged senators to vote to recall SB6 because that way she said they can properly discuss a bill that includes "a capital-gains tax increase."
"Some of us voted for a bill that we thought we were voting for something else than it was," she said.
But Dismang urged senators to reject Collins-Smith's motion, saying SB6 will be amended by the House and return to the Senate Revenue and Taxation Committee and the Senate.
"We will have the opportunity to revisit the issues," Dismang said.
Along with Collins-Smith, Sens. Alan Clark, R-Lonsdale; Scott Flippo, R-Bull Shoals; Blake Johnson, R-Corning; Bryan King, R-Green Forest; and Gary Stubblefield, R-Branch, were the only senators who voted for her motion.
Dismang said that Collins-Smith "had some good advice from colleagues about making sure that she's read the bills before she votes on them."
"In regards to the impact, there was discussion on the floor during the bill debate on the number of folks that was impacted," Dismang said. "Prior to this, we'd actually had a meeting that was scheduled to talk about the capital-gains tax cut and what was happening over in the House, but she didn't make that meeting, so we weren't allowed to have that update."
But Collins-Smith said that "we found out after the fact that it is raising taxes, and that's what it comes to, the increased taxes, and, of course, I am against that. My goal is to lower taxes," Collins-Smith told reporters later.
"I didn't realize the full implication of the vote that it was that much. We really thought it was a very minimal increase to capital gains and in essence it was not," she said.
Collins-Smith later introduced SB144 to repeal the private-option program, effective Dec. 31 of this year. The bill's co-sponsors are Sens. Cecile Bledsoe, R-Rogers, and Terry Rice, R-Waldron as well Flippo, Johnson, King and Stubblefield. The private option uses federal Medicaid money to buy private health-insurance policies for income-qualified adults.
She introduced the bill after Hutchinson called Thursday for funding the private option through Dec. 31, 2016, and appointing a legislative task force to study changes to the state's entire Medicaid program, including the people on the private option.
Afterward, Gillam said he hopes SB6 is amended to address some people's concerns about repealing the capital-gains tax cuts.
"There's been some concern over the Senate amendment and how it actually works as far as the logistics of business and transactions that are occurring this calendar year. ... Going retroactive back to the beginning of the year is not desirable for anybody, so we're just looking at making sure we do the responsible thing," Gillam said Monday afternoon before Jett released the proposed amendment to the bill.
House Republican leader Ken Bragg of Sheridan said he expected some conflict among fellow Republicans about repealing the capital-gains tax cut.
"It's a tax increase on one hand, but it's a significant tax decrease when you look at the whole package. That's what some people are struggling with," Bragg said. "Looking at the total package, hopefully people realize that's where the biggest benefit will be is the middle-class tax cut."
House Democratic leader Rep. Eddie Armstrong of Little Rock said some House Democrats want to discuss the poorer Arkansans they feel were left out of Hutchinson's call for middle-class tax relief.
"You cannot leave out the least of these in my opinion," Armstrong said. "You're looking at those people making $9.60 an hour, working 40 hours a week, 52 weeks a year, those hard, blue-collared workers that are making that living are making just below what the [tax] threshold calls for. ... Our caucus has put that question to the chairman [of the Revenue and Tax Committee]."
In a 30-0 vote, the Senate sent to Hutchinson HB1049 by Rep. Charlene Fite, R-Van Buren, which ends the future practice of emeritus memberships on the state Parks, Recreation and Travel Commission.
The current policy is to allow members who have served for 24 years to be officially given lifetime member status. The bill changes the policy to require members to apply for nomination to the board every six years.
In other action, the House approved HB1063 by Rep. Warwick Sabin, D-Little Rock, that modernizes the language in Arkansas law concerning the Arkansas History Commission and its duties.
After a short debate, the House passed HB1068 by Rep. Kim Hammer, R-Benton, to require write-in candidates to notify county clerks or the secretary of state's office that they plan to run for election 90 days prior to the election. Supporters of the bill said that it would not apply to school board elections.
Metro on 01/27/2015