Legislation that would implement Gov. Asa Hutchinson's plan to cut the state's top individual income tax rate from 6.9 percent to 5.9 percent over two years zipped through an Arkansas Senate committee on Monday.
With no audible dissenters, the Senate Revenue and Taxation Committee recommended Senate approval of Senate Bill 211 by Sen. Jonathan Dismang, R-Searcy.
"There has been a lot of work go into this bill .. and it is really a good compromise between the legislative body and the executive branch," Dismang told the committee he chairs.
No one testified for or against the bill after Dismang spent about a minute and a half explaining it.
If enacted into law, the income tax cut will be the third since Hutchinson took office in 2015.
SB211 would cut the top rate to 6.6 percent, effective Jan. 1, 2020, and then to 5.9 percent, effective Jan. 1, 2021, Dismang said. The measure also would cut the number of rates in the upper-income tax table from six to four, effective Jan. 1, 2020, and from four to three, effective Jan. 1, 2021.
The current top rate of 6.9 percent applies to people with at least $79,300 a year in 2018 taxable income. The Department of Finance and Administration expects that figure to "move to approximately $80,500" when adjusted for inflation this fall, agency spokesman Scott Hardin said.
SB211 also would create a middle-income tax rate of 5.9 percent, rather than the current 6 percent, that would apply to the portion of income that is at least $37,500 for people who earn between $22,500 and $80,500 a year.
[RELATED: Complete Democrat-Gazette coverage of the Arkansas Legislature]
About 579,000 taxpayers with net taxable incomes of more than $38,200 a year would receive a tax cut under SB211, the state Department of Finance and Administration estimated.
The cut in this plan would be $12 for a person with net taxable income of $50,000; $37, income of $75,000; $59, income of $80,501; $253, income of $100,000; $503, income of $125,000; and $753, income of $150,000, according to the governor's office.
Estimates of the tax cut for a person with net taxable income of $250,000, $500,000, $750,000 and $1 million were not available through the finance department on Monday afternoon.
SB211 would reduce state tax revenue by $25.6 million in fiscal year 2020, $22.9 million more in fiscal year 2021, $25.9 million more in fiscal year 2022 and then $22.9 million in fiscal year 2023, the department said in its fiscal impact statement on the bill.
"I'm pleased that the Senate moved so quickly to consider the 5.9 plan, and that it passed out of committee this morning without opposition," Hutchinson said in a written statement Monday.
"I look forward to the vote in the Senate later this week as we move to keep Arkansas competitive with our neighbors," the Republican governor said.
SB211 will require at least 27 affirmative votes to clear the Senate because it would raise individual income tax rates on some taxpayers, although no taxpayer will get a tax increase as as result of the measure, state officials said.
The Senate includes 26 Republicans and nine Democrats.
Dismang said he would ask the Senate to approve his bill today .
Asked if he has 27 votes in the 35-member Senate locked up for the bill, Dismang said in an interview that "I know better than to say that I have a three-quarters vote locked.
"I am confident where we are in the numbers. I've had positive feedback from what I believe to be enough members to pass the bill with three quarters. But anything can change when you make the presentation on the floor and maybe some other concerns are raised," he said.
Senate Democratic leader Keith Ingram of West Memphis, who serves on the Senate tax committee, told reporters that he didn't vote on SB211 in the committee.
"I don't mind it getting out of committee, but I want to have a hearing on the floor," he said. "I have got a lot of unanswered questions that I am waiting for."
While the finance department projected the governor's tax will eventually reduce tax revenue by $97 million a year after it's fully implemented, Lisa Gee, a senior policy analyst for the Institute on Taxation and Economic Policy in Washington, D.C., said last week that she projected the governor's income-tax cut would reduce state revenue by $157 million a year based on projections for 2019 income.
Gee said she forecast it would cut revenue by about $120 million a year using the 2016 tax returns process by the finance department.
An earlier income tax-cut plan projected a drop in state tax revenue of nearly $192 million, but the governor and his fiscal advisers reconfigured the plan after officials concluded that roughly 200,000 taxpayers would pay more than $30 million more in income taxes.
"I've had some pretty robust discussions with DF&A in regards to that estimate [of $97 million a year] and really trying to vet out and make sure that these [numbers] were really as stable and conservative as they needed to be for us to make a tax cut this significant," Dismang said.
"After discussing their methodology, I feel comfortable with these numbers," he said.
Hutchinson has pushed lowering the state's taxes on personal income since his first term.
In 2015, the Legislature enacted his plan to cut individual income tax rates for people with between $21,000 and $75,000 in taxable income; state officials project that plan will reduce state tax revenue by about $100 million a year.
The second cut, enacted in 2017, applied to people with taxable income of less than $21,000, trimming state revenue by about $50 million a year, officials said.
In other action Monday, the Senate tax committee also recommended Senate approval of two other bills:
• Senate Bill 196 by Ingram would allow industry or a business that locates in one of the state's 85 Opportunity Zones, designated by the governor, and that remains there five years to get a 50 percent discount on capital gains if the business is sold and zero capital gains if sold after 10 years.
"It is a great investment tool, and it was one of the best things that I think that came out of the [federal Tax Cut and Jobs Act]," Ingram said. "All this legislation does is mirror for the state of Arkansas what is done on the federal level and so we will give the same break that the feds will."
There is no way to develop a fiscal impact on the bill, he said, because "we don't know how many businesses will take advantage, and the fiscal impact will be [starting in] six years before any would place."
• Senate Bill 226 by Sen. Mathew Pitsch, R-Fort Smith, that would change the income tax credit allowed for donations or sales of machinery and equipment to certain educational institutions.
A Section on 02/05/2019