Low Income Tax Credit Bill Fails In Committee, But Capital Gains Bill Amended

A bill that would seek to give tax credits to people making under $21,000 a year failed to garner support from a key House committee Tuesday.

The House Revenue & Taxation Committee voted against House Bill 1344, sponsored by Rep. Warwick Sabin, D-Little Rock.

Sabin told the committee that the bill, also called the Working Families Opportunity Act, would help families that may have received minimum relief from a tax cut bill passed earlier in the session.

The bill would have been similar to the federal Earned Income Tax Credit and would take into account a percentage of the federal credit amount.

Under the bill, the credit would have been:

· 1.25 % for the tax year beginning Jan. 1, 2016.
· 2.5 % for the tax year beginning Jan. 1, 2017.
· 5% for the tax year beginning and after Jan. 1, 2018.

“If the amount of the income tax credit allowed under this section exceeds the taxpayer’s income tax liability, the excess shall be refunded to the taxpayer,” the bill noted.

Sabin said his bill had received broad support from lawmakers and would have an immediate impact on the pocketbooks of lower-income taxpayers.

However, the bill received some scrutiny based on the cost and current tax system in the state.

Tim Leathers, an official with the Arkansas Department of Finance and Administration, said the bill would not have an impact on the state’s budget the first year. But Leathers said it would have a $10 million impact for FY 2017 and a $40 million impact for FY 2018.

Also, the bill did not take into account the balanced budget requirement under state law, Leathers told the committee.

Rep. Charlie Collins, R-Fayetteville said he believed overall tax reform is needed.

“I agree 100 % with the spirit (of the bill), but don’t necessarily agree on the method,” Collins said.

Collins said he believes the $40 million impact might be better suited by reducing the brackets, rather than giving the credits.

Collins also said the lower brackets would help build incentives for work, as well as the reduced revenue going into the treasury helping to create ways to slow government growth and spending.

CAPITAL GAINS BILL APPROVED
The committee also passed a new version of a bill to reinstate a 50% exemption rate on capital gains set during the 2013 legislative session.

The bill was amended Monday in the House.

The first bill, which was first approved Thursday in committee, called for a 40% rate set earlier this year to be increased to 45%, retroactive to Feb. 1, 2015. From there, the rate would go to 50% effective July 1, 2016 with a $10 million exemption rate set in place.

The new bill would strike the 50% rate from Jan. 1 to Feb. 1; set the 45% rate, starting Feb. 1, 2015 and keep the 50% rate schedule in place.

The new bill will head to the House floor Wednesday.