Arkansas House kills Sabin proposal on earned income tax credit

After his bill for a higher earned income tax credit was defeated, Rep. Warwick Sabin (right) shakes hands with Rep. Charlie Collins, who spoke against the measure.
After his bill for a higher earned income tax credit was defeated, Rep. Warwick Sabin (right) shakes hands with Rep. Charlie Collins, who spoke against the measure.

The Arkansas House on Tuesday quashed legislation that was presented as Democrats' alternative to Gov. Asa Hutchinson's low-income tax cut.

The vote was 66 nays and 28 yeas for House Bill 1161, which would offer a higher earned income tax credit. Monday, the House passed Hutchinson's proposed $50 million income tax cut for Arkansans with incomes of less than $21,000 a year.

Both tax packages were presented as relief for the lower-third income bracket, and both moved out of the House Revenue and Taxation Committee last week. The chairman of that committee -- a former Democrat-turned-Republican, Rep. Joe Jett of Success -- expressed the desire to have the competing plans merged into a compromise.

Democrats largely voted in support of the Republican governor's plan Monday and held a meeting afterward with Hutchinson to discuss the earned income tax credit proposal.

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After the meeting, the governor's spokesman said there was no room for compromise, and the sponsor of the tax credit plan, Rep. Warwick Sabin, D-Little Rock, said he would nonetheless present his legislation.

"I feel a little bit like the lamb that's being led to slaughter," Sabin said as he presented HB1161, dubbed the "To Create the Working Families Opportunity Act." "I definitely don't relish the fact that this bill was put up in opposition to what the governor proposed."

After defeating Sabin's bill, the House adopted a "clincher" motion, a parliamentary move to reduce the chances of it being brought up again this session.

Republicans expressed concerns that the tax credits would be susceptible to fraud, which Sabin disputed, but said they would be open to considering such a proposal through a task force on tax changes that would be set up under the governor's bill. Sabin expressed optimism at the chance to continue "good policy discussion."

Speaking against the bill, Rep. Charlie Collins, R-Fayetteville, said "elements of Washington change" could make an expansion of the earned income tax credit a more viable option in the future.

Clarifying his remarks to a reporter later, Collins said he would like to see federal funding from other social programs, such as the state's private-option Medicaid expansion, re-allocated into an earned income credit.

The tax credit established under Sabin's bill would have been worth 5 percent of the federal earned income credit available to taxpayers for tax years starting on or after Jan. 1, 2017.

The federal credit is only available to workers earning below a certain income, based on the number of children they have. The amount of the credit is determined as a percentage of the worker's earned income, with some workers eligible to receive a rebate higher than the taxes they owe.

To qualify, a single worker with no children must earn less than $14,880, while the credit is available to married couples with three or more children earning up to $53,505, according to the Internal Revenue Service.

The state Department of Finance and Administration estimated Sabin's tax plan would cost the state $40 million in fiscal 2018, which starts July 1. The governor's tax cut is expected to reduce state revenue by $25.5 million when it starts halfway through fiscal 2019 and $50 million a year thereafter.


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Sabin called his plan "more efficient" than the governor's because it was targeted specifically at lower-income workers, and gives them incentives to earn more.

He noted that earned income tax credit originated from conservative economist Milton Friedman and was embraced by prominent Republicans such as President Ronald Reagan and U.S. House Speaker Paul Ryan.

J.R. Davis, a spokesman for the governor, said the governor's tax cut is "the right plan at the right time" and would cover a broader swath of Arkansans, noting that those living on disability or Social Security are not eligible for earned income credits.

While the House prevented Sabin's bill from being reconsidered, identical legislation has been filed by Sen. Jake Files, R-Fort Smith, the Senate Tax and Revenue Committee chairman. However, the upper chamber has yet to act on Files' legislation and has already passed the governor's tax cut.

A Section on 01/25/2017

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