House panel adopts Hutchinson’s $97 million tax cut plan, heads to chamber floor

A House panel on Tuesday (Feb. 12) gave a “do pass” recommendation for Gov. Asa Hutchinson’s $97 million tax cut proposal during an hour-long debate that centered on whether the measure was a tax break for the wealthy.

After a quick voice vote and roll call on Senate Bill 211, the House Revenue and Taxation Committee easily adopted the third phase of Hutchinson’s multi-year tax cut package by a count of 15-2, with three lawmakers abstaining.

In introducing SB 211 to the panel he oversees, Rep. Joe Jett, R-Success, told committee members Hutchinson’s so-called “5.9” tax plan would allow Arkansas to compete for more jobs by lowering the state’s marginal tax rate from 6.9% to 5.9% over the next two years.

“We’ve all heard that Arkansas lags in being competitive with surrounding states and this will finally get us into position,” said Jett, chairman of the House committee that sets state policy on tax and revenue-producing proposals.

In anticipating possible claims that SB211 will be seen by Arkansas taxpayers as a tax break for the rich, Jett argued the proposal is the third phase of Hutchinson’s earlier tax cuts during the 2015 and 2017 legislative session for the working poor and middle class.

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.

“We all knew this was coming,” Jett told the House panel with Senate counterpart Sen. Jonathan Dismang, R-Searcy, at his side.

Earlier, in attempting to attach an amendment that would gut SB 211 by wiping out $73 million in the bill to retool the state’s top tax bracket, House Minority Leader Rep. Charles Blake, D-Little Rock, told the committee the measure would largely benefit Arkansas “one percenters,” that make over $456,000 annually.

“The concerns that we [Democrats] continue to have is this bill has been fast-tracked through the Senate and is just now getting fiscal numbers that aren’t matching,” said Blake, whose proposal failed on a party-line voice vote. “What we have to be able to do is go back home and tell the 99% of taxpaying Arkansans that we did something and cut their taxes to allow us to do more work for them going forward.”

After Jett and Blake finished their pitches for and against SB 211 and took a volley of questions from the panel, several citizens came to the table and spoke vehemently against the governor’s tax plan. Each of the SB 211 opponents argued the legislature could better use the $97 million in the tax plan to improve education, support anti-poverty programs, or finance a state Earned Income Tax Credit program for the working poor.

In one back-and-forth that stood out during the hour-long discussion, Rep. Jim Wooten, R-Beebe, engaged in a spirited debate with Rev. Gayle Brooks of Canvas Community Church in downtown Little Rock concerning the charitable pursuits of Arkansas’ wealthiest denizens.

“As I sit here this morning and ponder, I sense a great resentment for people who have worked hard and gone out and developed, and they are fortunate that they have a high income. And I just do not feel that they should be any different than any other citizen of the state of Arkansas. Do you agree with that?” asked Wooten, a retired businessman and founder of Tiger Mart convenience store and truck centers.

Little Rock resident Barry Haas and Josh Waters of Fayetteville-based Conduit for Action, also spoke for and against the measure to end the panel debate before Jett closed for his bill. In the end, 15 Republican lawmakers approved sending SB 211 to the full House. The panel’s lone Democrat members, Reps. Tippi McCullough of Little Rock and Rep. Monte Hodges of Blytheville cast the “no” votes.

House Speaker Matthew Shepherd, R-El Dorado, said he looked forward to placing SB 211 on the House calendar for floor debate by this Thursday or early next week. The Speaker also told reporters there is still work to do to marshal the three-fourths votes to approve the tax cut bill in the House, which is split by a 76-24 GOP supermajority.

“It is going to be a pretty tight vote,” Shepherd told reporters after the committee hearing. “It is a very fluid situation, but I think the fact that it came out of committee with really strong support I think that sends a message too.

“Now I will go back and look at our vote count and hopefully this gives us a better opportunity now that we got it down to the (House) end. There is just one hurdle left for us,” said Shepherd, one of four SB 211 co-sponsors along with Jett, Dismang and Senate President Jim Hendren, R-Sulphur Springs.

One GOP lawmaker still opposed to SB 211 is Rep. Dan Douglas, R-Bentonville, who has two bills sitting in House committees that will partially fund a state highway maintenance plan and enact into law a sales tax on remote Internet sales. On a voice vote for SB 211, the Northwest Arkansas lawmaker audibly voted against the measure and later abstained when Democratic members called for a voice vote.

Douglas told reporters after the committee meeting he needed to study SB 211 more to make sure the bill’s $15 million estimate in savings from Hutchinson’s government transformation efforts and other cost reductions are accurate.

“If my income goes down, I have to cut my cost,” Douglas said. “I feel like we have to do a better job of cutting non-essential government services and reduce some costs and try to be more efficient.”

If SB 211 comes to the House floor on Thursday, as Jett hopes, a debate is also expected to center around the details of the governor’s $300 million highway funding plan, which was outlined on Monday during a press conference at the state capitol.

Douglas said some GOP lawmakers have concerns about a proposal in the highway plan that permanently extends the state’s half-cent sales tax to Arkansas voters in 2020. Other Republican lawmakers, he said, also have a problem with a $58 million wholesale gas tax that would be the equivalent of a 3 cents per gallon hike on regular unleaded and 6 cents per gallon increase on diesel fuel.

“I’ll be honest. I feel that the governor’s highway plan he announced yesterday is kicking the can down the road,” said Douglas.

Last week, in the first real test for Hutchinson’s broad agenda for the 92nd General Assembly, a supermajority of legislators 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 state Tax Reform and Relief Task Force created during the 2017 legislative session to study the state’s cumbersome tax code.