Week In Review

State Capitol Week in Review

            LITTLE ROCK – In a unique and historic vote the Arkansas Senate approved a middle class tax cut in the opening days of the legislative session.

            In living memory, the Senate has never passed one of the signature bills so early in a session. Important fiscal legislation usually will not be considered for a final vote in the Senate until the final weeks of a session in March, because of the ramifications throughout the entire state government budget.

            The governor wanted speedy approval of the measure, Senate Bill 6, and the legislative leadership strongly supported it.  It passed in the Senate by a vote of 30-to-3.

            SB 6 lowers state income tax rates for taxpayers who earn between $21,000 and $75,000 a year. It will save Arkansas taxpayers more than $80 million dollars a year when it has taken effect completely. Those savings will begin to take effect for incomes earned in 2016.

            If your annual income is between $21,000 and $35,099, you will pay 5 percent in 2016 rather than the 6 percent for 2014 and this year. If your income is between $35,100 and $75,000 a year, you will pay 6 percent in 2016, rather than the current rate of 7 percent.

            The measure will lower income taxes for the wealthy and the poor, but not as significantly as for the middle class. It will lower taxes for an estimated 500,000 Arkansans.

            The bill’s sponsors say it will stimulate the Arkansas economy because people will have more available money to spend, and when people spend more it boosts job creation.

            Actually, middle class Arkansans will save more than $100 million a year under SB 6. The revenue impact on state government will be $80 million because SB 6 also changes tax treatment of income from capital gains. That change will offset about $21 million dollars in lost revenue.

            Those voting against the bill said they did not object to granting tax relief to the middle class. Their opposition was founded on concern that it is too soon in the session to approve such a far-reaching tax cut, which will have corresponding far-reaching implications for the budgets of state agencies.

They would be more comfortable, they said, with assurances that the state will have adequate reserves, for example, for incentives in the event a major business wants to locate in Arkansas and create jobs.

            Another highlight came when the governor made a major speech on the “private option,” which is the Arkansas model for implementing the federal Affordable Care Act. The governor said that he would push for an extension of the private option through calendar year 2016. However, he said that controversy surrounding the health coverage plan had made the term “politically toxic.”

            He will advocate for creation of a task force to make an extensive study of not only the private option but also of the entire Medicaid and health care system.

            The House of Representatives approved HB 1011 to allow university students who qualify for Governors’ Scholarships and Governors’ Distinguished Scholarships to defer receiving the grants for two years without jeopardy of losing them. The deferment would be allowed only for family emergencies and community service.