Arkansas House adopts Gov. Hutchinson’s $97 million tax cut plan, headed for his signature

The final legislative act in Gov. Asa Hutchinson’s legacy-setting tax cut trilogy was approved Thursday (Feb. 14) in the state House of Representatives with the necessary three-fourths vote after a debate on the measure was cut short on the chamber floor.

By a vote of 82-14, Senate Bill 211 now heads to the governor’s desk where the measure is expected to be speedily signed and enacted into law early next week as the first major item in the Hutchinson administration’s broad legislative agenda for the 92nd General Assembly, officials said.

“The long-term benefit to all Arkansans is that the lowered tax rate puts us in the same bracket with most of our neighboring states, which is significant to CEOs who want to move into other states,” Hutchinson said in a statement following the vote. “Under this plan, no one will pay more in income taxes, and combined with the final reduction in the grocery tax, Arkansans will keep even more of their paycheck.”

As his first act in the 2015 session, Hutchinson pushed the legislature to enact a $102 million tax cut that lowered the state’s middle-income tax bracket from 6% to 5%. That was followed in the 2017 session by a smaller $50.5 million tax cut for the working poor after some Republican lawmakers promised the legislature would look at a possible tax cut for the upper-income brackets in the 2019 session.

Before SB 211 was approved, the pitch by Rep. Joe Jett, R-Success, for the governor’s current $97 million tax cut for the state’s top income bracket largely mirrored his “do-pass” win Tuesday in the House Revenue and Taxation Committee. Jett told his fellow House members that the governor’s proposal to cut the state’s marginal tax rate from 6.9% to 5.9% would make Arkansas more competitive with surrounding states.

“I think it is important to note that in the last four years before this bill, all Arkansans have had tax reductions along with the grocery tax cut this year of $61 million,” said Jett, who chairs the House tax panel.

After the northeast Arkansas Republican laid out the benefits of the third phase of Hutchinson’s omnibus tax cut package, several lawmakers from both parties asked the chamber to delay a vote on the measure so concerns about the revenue impact of the measure could be studied more closely.

Rep. Laurie Rushing, R-Hot Springs, told lawmakers she had requested some additional financial information from Hutchinson about SB 211, but did not receive a formal reply to allay her concerns before the House convened on Thursday.

“I am only requesting information and numbers that I had asked for on Monday that I have not yet received,” Rushing said, adding that Hutchinson sent her a text message before the House session seeking to allay her concerns. “For me, it means something to hold tight on what colleagues promise each other when we get together, and we want to make sure we receive the information we requested to make informed decisions.”

Later during the floor debate, House Minority Leader Rep. Charles Blake, D-Little Rock, strongly criticized SB 211 as a tax break for the state’s “one percenters.” The Democratic Party leader then angrily chided his fellow lawmakers for acquiescing their legislative responsibilities to take on tough issues to benefit all Arkansans.

“I want to make sure you can all go back home and tell your constituents that you chose a high-income tax cut and for them to vote to increase their sales tax,” Blake said, highlighting Hutchinson’s $300 million highway funding plan outlined earlier in the week that would permanently extend a half-cent sales tax and enact a wholesale levy on gasoline and diesel fuel sales.

After Blake’s speech, the House blocked an attempt by Rep. Jim Sorvillo, R-Little Rock, to table SB 211. Then, just before several members lined up in the queue to speak for and against the governor’s tax plan, the full House agreed in a voice vote to bring the measure up for immediate consideration.

Last week, in the first real test for Hutchinson, a supermajority of legislators in the Senate gave the governor a 28-5 victory on SB 211 after losing a bruising floor debate a day earlier when two key Republican senators abstained from voting on the measure.

Under the governor’s abridged “5.9” plan, Arkansas’ top marginal rate would drop to 6.6% in the first year of the biennium and down to the preferred 5.9% in the second year. Last week, Hutchinson unveiled SB 211 as a modified version of the earlier $192 million “2-4-5.9” tax cut package, which was recommended by the bicameral Arkansas Tax Reform and Relief Task Force created during the 2017 legislative session to study the state’s cumbersome tax code.

Next up on the governor’s legislative program is his $300 million highway plan, raises for teachers and streamlining state government from 42 to 15 cabinet-level departments. Lawmakers will also take up a plethora of social and fiscal issues — including the budget-balancing Revenue Stabilization Act — that are expected to keep lawmakers in Little Rock for several more weeks.

HUTCHINSON’S STATEMENT ON PASSAGE OF SB 211
“The Arkansas House today joined the Senate in making history by passing the 5.9 tax-reduction plan,” Gov. Hutchinson said. “I am grateful for all the work that culminated in the passage of this bill, which makes our tax structure more competitive and fair.

“This is the third phase of my three-part plan to reform Arkansas’s tax code. In 2015 and in 2017, I signed into law the two biggest income tax cuts in the state’s history. With the passage of Senate Bill 211 today, 100% of Arkansas taxpayers ultimately will benefit from nearly $250 million in reduced taxes.

“The immediate benefit of these historic reductions is that Arkansans keep more of their paychecks,” the governor said. “The long-term benefit to all Arkansans is that the lowered tax rate puts us in the same bracket with most of our neighboring states, which is significant to CEOs who want to move into other states.

“I particularly want to thank Speaker Shepherd and President Pro Tempore Hendren for their leadership in achieving a three-fourths vote in both houses. This was not easy, but the 82-vote margin in the House was a statement of overwhelming bipartisan support.

“Under this plan, no one will pay more in income taxes, and combined with the final reduction in the grocery tax, Arkansans will keep even more of their paycheck,” Governor Hutchinson said.

“We’ve accomplished these reductions without cutting services or programs that are essential to Arkansas. This is responsible government that is responsive to the needs of Arkansas.”