Arkansas governor vows to seek deeper tax cuts in 2 years

AP News
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Posted: Jan 18, 2017 3:58 PM

LITTLE ROCK, Ark. (AP) — Arkansas Gov. Asa Hutchinson got a cool reception from fellow Republicans when he proposed a tax cut for low-income residents that was more modest than some legislators had hoped. So, he made them a pledge: Pass it now and he'll push for much deeper cuts in two years.

The governor's vow seems to be winning over skeptics in Arkansas, one of numerous Republican-dominated states that seem to have a political mandate for tax relief but are facing tight budgets that could make enacting them difficult.

The Senate Revenue and Taxation Committee on Wednesday endorsed Hutchinson's $50 million proposal to cut income taxes for more than 650,000 residents making less than $21,000 a year. The full Senate on Monday is expected to vote on the tax cut, which would take effect in 2019.

The cut is less than half the reduction Hutchinson signed into law two years ago and less than what some GOP lawmakers would like, but the governor's promise to seek more comprehensive reform later has appeased key critics from his party. At least two lawmakers who had called for deeper cuts dropped their efforts after Hutchinson proposed a task force to recommend major tax code changes by fall 2018.

"I think a lot of people see the soundness and the logic of taking care of this part of the income ladder at this point, and I think a lot people also see the wisdom of, before we make large changes that are going to be more expensive on the upper end of the tax code, let's actually do some due diligence," Senate Majority Leader Jim Hendren, who is sponsoring the tax cut, told reporters after the vote.

A recent Associated Press survey found that more than half of the states — 33 — are currently dealing with a budget shortfall or expect to confront one in the coming fiscal year. Arkansas is among a handful of GOP-led states signaling caution about tax cuts, while other Republican such as Kansas and Oklahoma are debating whether to reverse course and raise taxes.

Hutchinson said the panel's vote showed "broad support" for his tax cut plan.

The bill also won support from Democrats on the panel, one of whom said he was still concerned about the Legislature moving forward on tax cuts with uncertainty about the state's finances. Arkansas' net available revenue for the fiscal year so far is $8.8 million less than forecast.

"I'd like the luxury of looking at what January revenues are going to be and even what February revenues are going to be...but I think the governor's got the momentum to get this one out," said Democratic Sen. Bruce Maloch, who said he'll vote for the cut next week.

The plan could still face an obstacle before the House Revenue and Taxation Committee, which is expected to take up Hutchinson's proposal Thursday. Republican Rep. Joe Jett said the committee, which is evenly split between the GOP and Democrats, will also on Thursday consider a competing $40 million tax credit proposal for low-income taxpayers.

"I think the policies are different and they deserve consideration in comparison alongside one another," Democratic Rep. Warwick Sabin, who has proposed the tax credit, said.

Legislative leaders have said a tax break for veterans Hutchinson is also championing faces questions from some lawmakers who are concerned about a plan to raise taxes on manufactured housing to help pay for the exemption. Hutchinson last week said he was open to discussing any alternatives lawmakers may have for funding the exemption.

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