Arkansas Senate rejects Gov. Hutchinson’s $97 million tax cut plan, two Republicans abstain

Gov. Asa Hutchinson’s $97 million tax cut bill for the state’s top income bracket that breezed through a Senate panel on Monday hit a wall in the full chamber after the measure failed to get the necessary three-fourths vote for approval on Tuesday (Feb. 5).

Senate Bill 211, sponsored by Sen. Jonathan Dismang, R-Searcy, failed in the full Senate by a vote of 25 yeas, 5 nays and a handful of senators not voting, including two Republicans – Sens. Terry Rice, R-Waldron, and Bill Sample, R-Hot Springs. Because the current tax rates are related to individual income and would be changed by SB211, the bill can only be enacted into law by a supermajority, or three-fourths vote of the 100-member House and 35-seat Senate.

After the vote, Gov. Hutchinson said he was disappointed to see that two Republicans did not cast a vote for his so-called “5.9” tax cut plan on the Senate floor. “We recognize that achieving a three-fourths vote is a challenge. The fact that we got within two votes on the first ballot shows that it continues to have momentum,” said Hutchinson. “This is all part of the legislative process and debate, and we look forward to it being called back.”

Under Hutchinson’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 state Tax Reform and Relief Task Force that was created during the 2017 legislative session to study the state’s cumbersome tax code.

But the bill will likely come back up in the next week as Dismang’s speedy request to expunge the vote was affirmed by the full body. Earlier during the hourlong debate, Dismang, Senate President Jim Hendren, R-Sulphur Springs, and other Republicans defended the bill amid a motion on the floor by Sen. Will Bond, D-Little Rock, to suspend Senate rules and move the bill back to committee to cut out the 5.9% tax bracket, which he called at $73 million tax break for the state’s “one percenters.”

Bond and other Democrats also criticized the governor’s proposal and said it was too costly and would lead to cuts in services to needed state programs. Sen. Linda Chesterfield, D-Little Rock, called Hutchinson’s tax cut proposal a “hybrid” because it did not follow the consensus “2-4-5.9” legislation recommended by the 16-member state tax reform task force last summer. Like many, she pointed to the need to pay for state highway funding, which is expected to come up later in the session.

“I wax concern that we are cutting so much of the revenue of the state. And I wax concern because I know at some point in time the economy is going to be what it is today, and then we are going to have to try and make up that money,” said Chesterfield. “I (am) also concerned that we have not found the money to rebuild the infrastructure of this state and then we are going to have to go to the ‘little guy’ and ask him or her to tax themselves in order to build the roads.”

Following Chesterfield, Bond passionately asked his senate colleagues to vote against SB 211, grousing that the Legislature has cut more than $500 million in taxes over the last decade. He also argued those same tax cuts have left Arkansas ranked near the bottom among all 50 states in education, teen pregnancy, salaries for teachers and highway police, and other areas.

“At some point, we have to stop and say, ‘what do we want Arkansas to be? What are we going to lead the nation in? What are we going to improve (because) there are a lot of categories where we are not doing that well,’” said Bond, pleading to his fellow senators, “Let’s not do this.”

Sen. Jason Rapert, R-Conway, countered Bond’s argument by noting that Democrats had overseen the state legislature for more than a century without addressing critical state needs. He said once Republicans took control with a majority in the House and Senate in 2013, the state has improved it’s lot economically and fiscally.

“I don’t think it is appropriate to get up and quote a bunch of statistics that frankly are a result of 138 years of Democratic leadership of our state,” he said. “It takes awhile to turn a ship this big, and we have voted for multiple tax cuts and we have seen our state improve.”

Two other Democrats, Sens. Joyce Elliott and Keith Ingram of Little Rock and West Memphis, respectively, came to the floor after Rapert to speak against SB 211, arguing that the true cost of the legislation still has not been determined. However, Hendren, who co-chaired the tax reform task force, ended the debate by arguing the $97 million price tag is accurate.

“I have confidence that is the best estimate we can go based on what we’ve seen. It was done using the exact same modeling that we have done for the previous tax cuts and those numbers have proved to be true,” he said.

After the Senate adjourned, Hendren told reporters that SB 211 could come back up as early as tomorrow or sometime next week as questions immediately began swirling as to why the two Republicans, Rice and Sample, failed to vote for the governor’s tax plan. Hendren said both senators and other legislators had expressed some desire to tie the discussion of tax cuts and highway funding together.

“That is something that is understandable, but it is almost impossible to really do that because you would have to understand what the budget is going to be before you determine spending,” said the Senate leader, who has frequently pointed out that lower- and middle-income taxpayers have received cuts.

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.

Although he did not have an exact date SB 211 may come back to the Senate floor, Hendren said he will talk with those senators he thought would have supported the measure. Besides Rice and Sample, Democratic Sens. Bruce Maloch of Magnolia, Eddie Cheatham of Crossett, and Stephanie Flowers of Pine Bluff, also did not cast a vote. Sen. Greg Leding, D-Fayetteville, joined Democrats Bond, Chesterfield, Elliott and Ingram in voting against the measure.

On the House end of the capitol, Democrats have declared that there are not 75 votes for the governor’s tax cut plan although the minority party only controls 24 seats. House Minority Leader Rep. Charles Blake, D-Little Rock, is expected to file a bill this week that will seek an Earned Income Tax Cut (EITC) that targets relief to lower-income taxpayers.

UAMS CANCER INSTITUTE DESIGNATION
Earlier on the Senate calendar, the chamber unanimously approved a bill to make the University of Arkansas for Medical Science’s Winthrop P. Rockefeller Cancer Institute in Little Rock a National Cancer Institute-designated cancer center.

Senate Bill 151, sponsored by Sen. Missy Irwin, R-Mountain Home, was easily adopted by a vote of 35-0. The UAMS funding stream from the state for the cancer center designation would be between $10 million and $20 million per year. Irvin said there are now 70 National Cancer Institutes located in 36 states across the U.S. None are in Arkansas, Mississippi or Louisiana.

Irvin said having a National Cancer Institute in Arkansas as a cancer treatment hub would draw thousands of cancer patients to Little Rock for clinical trials, treatment, prevention care, screening and other services, providing a $70 million annual economic boost to central Arkansas. The bill, which was unveiled as part of a larger package of legislation supported by the newly-formed Republican Women’s Caucus, now goes to the House Public Health, Welfare and Labor Committee, where it has 16 co-sponsors.