House rejects EITC bill, governor’s tax cut plan now has clear path; military tax exemption sees changes

Arkansas lawmakers on Tuesday rejected legislation on the House floor to create a state-run Earned Income Tax Credit program, clearing the way for Gov. Asa Hutchinson’s larger $50.5 million tax cut proposal to be one the first key bills enacted by the legislature in the 2017 session.

In introducing House Bill 1161, Rep. Warwick Sabin, D-Little Rock, said he did not relish having to pit his bill against the centerpiece legislation of the governor’s $5.5 billion biennial budget.

“Colleagues, today I feel a little bit like the lamb being led to slaughter,” Sabin said. “But, I really actually am very grateful for this opportunity to be able to discuss this legislation.”

In making his argument for the full House to approve his bill, Sabin’s pitch was nearly the one he made to the House Revenue and Taxation Committee, which last week gave HB 1161 a “do pass” recommendation at the same time it advanced the governor’s tax cut package for low-wage earners making less than $21,000 a year.

Sabin said he also appreciated the governor actually laying out a tax cut for the state’s working poor, especially after his first $105 million tax break for middle-class wage earners was enacted by the 2015 legislature and a capital gains tax cut for the wealthiest tax bracket was passed in the 2013 session.

“Really, the only Arkansans that were left out of the tax cuts that we offered were the working poor,” he said. “So to the extent that the governor’s tax cut addresses that group, of course we are supportive of it. But, the policy you have in front of you, the EITC, is a more effective policy.”

After his appeal at the House podium, several Republican lawmakers speaking against HB 1161 quizzed Sabin with familiar talking points espoused by several conservative tax groups, including the Arkansas chapter of Americans for Prosperity that spoke against the bill in committee. Rep. Stephen Meeks, R-Greenbrier, asked Sabin about Internal Revenue Service data that suggests the federal EITC program is rife with fraud and would redistribute wealth to non-working taxpayers in the form of a subsidized tax refund.

“In this situation, we may actually be creating a subsidy, or in other words, the taxpayer will be getting more than they paid in. So, in essence, what is going on is we are taking tax dollars from one citizen and giving it to another citizen,” Meeks said.

Several other Republican lawmakers also queried Sabin on a similar line, but the Democratic lawmaker refuted those concerns with counterpoints that the federal EITC has been a popular, anti-poverty program that incentivizes work. He also repeated his earlier committee speech that the program is championed by former U.S. Presidents Ronald Reagan and Gerald Ford and noted conservative economist Milton Friedman.

In support of Sabin’s bill, Democrat lawmakers Reps. Clarke Tucker and Vivian Flowers of Little Rock and Pine Bluff, respectively, reminded fellow legislators that HB 1161 would cost taxpayers $10 million less than the governor’s bill and offer more actual tax relief to the low-income wage earners.

“Many of us represent people in this state, which is relatively a poor state – and we have to keep that in mind,” Flowers said.

Despite the strong plea by Flowers to approve HB 1161, the House overwhelmingly rejected the bill by a vote of 66 “nays,” 28 “yeas,” two presents and three members not voting. A clincher motion was immediately adopted by consent after the vote, which means the bill can be reconsidered by the House at a later day.

Sen. Jake Files, R-Fort Smith, chair of the Senate Revenue and Tax Committee, is co-sponsor of Sabin’s bill. He has said he would run Sabin’s bill through his committee at some point during the session. Rep. Charlie Collins, R-Fayetteville, who made closing arguments against HB 1161, said the “negative income tax credit” should be included in future state tax policy discussion, including the Blue Ribbon panel supported by the governor.

POLICE PROTECTIONS
Earlier in the day during committee hearings, the House Judiciary Committee advanced a measure by Rep. Dwight Tosh, R-Jonesboro, that would enhance the penalties for crimes committed against law enforcement officers, first responders and members of their families.

Tosh testified before the committee there were already laws on the book that prosecute crimes against law enforcement officials, but said HB 1172 would apply in cases where prosecutors wanted to charge those who specifically targeted police officers.

“The other statutes are already on the books if that is the one that prosecutors want to use, and if they choose that then they cannot use this,” said Tosh, a retired state trooper. “This is only when (law enforcement) is purposely targeted and selected.”

Tosh, vice chair of the House panel, testified before the committee that there has been a marked increase in the number of assaults against law enforcement officials in Arkansas and across the nation.

“I have never seen this type of magnitude in officers being slain, ambushed or assaulted,” he said. “In 2016, the number of assaults on law enforcement officers … rose by 56%. And for what reason? Simply because of the uniform they wear and the job that they do.”

After Tosh’s speech, one lone dissenter testified that the Jonesboro lawmaker’s statistics were incorrect and that his proposal would be another law on the books that was not needed.

“I don’t want to come across as someone opposed to police,” said Conway resident Paul Calvert, who testified that he believed in the conservative principles of limited government. In speaking against HB 1172, he said law enforcement officials would be getting special protections not reserved for the average citizen.

“I have a couple different issues with this type of legislation. I think there is a pretty serious problem between animosity (of) police and some citizens. There is more than one reason for this, but often it is driven by bad behavior by both parties – police and citizens,” Calvert told the committee. “There is common perception that police officers consider themselves to be superior to regular citizens, and I think there is some validity to this.”

Calvert further testified that if the legislature considers giving special consideration to police officers, then they should also give equal deliberation when considering hate crime protections and other similar legislation for people of color and other citizen groups.

Despite Calvert’s plea, the House panel unanimously approved Tosh’s bill, which has 45 co-sponsors and is now headed to the House floor. Sen. Gary Stubblefield, R-Branch, is expected to run Tosh’s bill through the Senate Judiciary Committee later this week.

MILITARY TAX EXEMPTION PROPOSALS
In other legislative activity at the State Capitol, the second part of the governor’s tax cut plan that would roll back taxes on all retirement pay for veterans and their surviving spouses is expected to come back up in Senate and House committees on Wednesday and Thursday, respectively.

Last week, lawmakers held off their committee proposals to use state tax incentives to lure military veterans to Arkansas to make necessary amendments and allow time for the governor’s larger tax cut proposal to wind its way through the legislature.

Rep. Charlene Fite, R-Van Buren, who pulled down her House bill offering a graduated tax break to military veterans, said there has been considerable work to make changes that dealt with provisions that raise the levy on manufactured housing and candy and soft drinks. She also said the bills had to have the approval of the governor, who was out of state most of last week.

One lawmaker who is part of the group making amendments to the House and Senate bills said the “changes are voluminous,” noting that the revisions addressing the $13 million cost of the legislation are longer than the original bill.