House approves governor's tax-cut bill 95-2

State Reps. Vivian Flowers, D-Pine Bluff, and Kim Hendren, R-Gravette, visit Thursday in the House chamber. The House passed legislation Thursday cutting the income-tax rates for middle-class Arkansans.
State Reps. Vivian Flowers, D-Pine Bluff, and Kim Hendren, R-Gravette, visit Thursday in the House chamber. The House passed legislation Thursday cutting the income-tax rates for middle-class Arkansans.

The Arkansas House approved a bill Thursday authorizing middle-class tax cuts championed by Gov. Asa Hutchinson, including an amendment that repeals only a portion of the 2013 capital-gains tax cut.




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By a 95-2 vote, the House approved Senate Bill 6 to cut tax rates for Arkansans with taxable income between $21,000 and $75,000. House leaders spent the past few days polling members but said up until Thursday that some representatives still had concerns that the bill might be viewed as a tax increase.

In the end, only two representatives, Vivian Flowers, D-Pine Bluff, and Matthew Shepherd, R-El Dorado, voted against the measure.

"I think it's just a great example of the process with the members being able to have their input," said Speaker of the House Jeremy Gillam, R-Judsonia. "I did anticipate a great deal of support for it just from making sure they had the time to work through the questions they had. ... I was confident, given the time we were able to give them, that they were going to come up in support of the bill."

Tuesday, a House committee amended the Senate version, which eliminated the entire capital-gains tax cut that had been approved by the Legislature as Act 1488 of 2013. That act increased the net capital-gains exclusion from state income tax from 30 percent to 50 percent, starting in January.

The House-approved version allows for the full capital-gains tax cut through the end of this month. Starting Sunday, however, the exemption would decrease to 40 percent of net capital gains.

The measure, if approved by the Senate with the House amendment, will decrease the income-tax rate for Arkansans earning between $21,000 and $35,099 from 6 percent to 5 percent. The rate for incomes between $35,100 and $75,000 would drop from 7 percent to 6 percent under the bill.

Hutchinson previously said the House amendment will likely cost the state about $10 million in tax revenue. But Gillam said lawmakers don't anticipate needing to make additional budget cuts because they're expecting other state revenue to increase enough to make up for the loss.

Hutchinson said Thursday that he was pleased with the House vote.

"I actually listened to some of the remarks and speeches that were being made, and really to see bipartisan support for this tax bill, which is really an economic development vote. ... I think they realized that," he said. "It had great support, and we appreciate that and look forward to finalizing that next week."

Senate President Pro Tempore Jonathan Dismang, R-Searcy, said he doesn't anticipate any problems passing the amended measure in the Senate.

"The support that existed in the initial passage is still there, and it will pass easily," he said. "I would say it's likely that Tuesday would be when this wraps up."

Dismang said he has contacted Senate Revenue and Taxation Committee Chairman Sen. Jake Files, R-Fort Smith, to ask if he planned to run the bill through committee Monday.

There was little comment about the bill on the House floor Thursday, with only two representatives speaking for or against the measure.

House Minority Leader Eddie Armstrong, D-North Little Rock, said he was surprised by the overwhelming support for the tax cut. Up until midnight, he said, he had heard rumors of a number of Republicans who were planning to vote against the tax cuts, or abstain because of dissatisfaction with the capital-gains amendment.

He also expected about five no votes from his own caucus because of concerns that the measure left out the working poor. The sharp rate drop doesn't extend to those making less than $21,000 per year.

"Some new members went with the vote of good conscience. No one, Republican or Democrat, wants to be seen voting against the middle-class tax cut," Armstrong said. Democrats "support tax relief for middle-class families."

Armstrong commended Flowers, a freshman member of the House, who voted against the bill.

"I was proud. As a freshman member, it's tough to take an independent stand," Armstrong said. "Many people in [her district] fall under [the tax cut's threshold]. ... That's exactly what she should do."

After the vote Thursday, Flowers said she supported the tax relief for the middle class, but she was concerned that any potential cuts to state services will adversely affect poorer Arkansans who didn't win any tax relief.

"On its face I think the bill is a good bill and I do have confidence in the governor, but it's not the best bill," Flowers said. "Nearly 50 percent of the taxpaying population will not benefit from this tax cut: the hardest working [Arkansans] who work typically without benefits. ... With all of these great needs to be met, I feel a little uncomfortable [about cutting taxes] without a whole lot of explanation about how this will be sustainable."

Rep. Kim Hendren, R-Gravette, voted against the measure when it was in committee, saying he was concerned about how much the amendment would cost and how the state would pay for it. He spoke for the bill on the House floor Thursday, explaining what he called his "flip-flopping."

"I voted against the amendment and the bill, and I don't appreciate me voting one way in committee and then coming down here to the floor and flip-flopping. ... That can get your head skinned if you're not careful about it," he said.

"I've asked for a financial statement and there's still not one," he said. "I have had commitments from the administration and from the people that run this place down here that it's $10 million and that the $10 million will be found ... and that it won't be used later to club some of us who vote for it over the head later."

Metro on 01/30/2015

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