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December 7, 2021
Senate Revenue and Tax Committee
Sample: Call the Senate Revenue and Tax Committee to order for this special session. Sen. Dismang, I’d ask you if you had any comments, but since you’re sitting at the table, I’m fixing to call you on SB 1. And if you would.
Dismang: Yes, sir. Thank you. Members, I think all of y’all have had a chance to review this. We’ve floated this out for a while now and really I think went through a lot of the details. So I’m going to be fairly brief in the overview. I just want to talk a little bit about the tax plan’s foundations and I think what the ultimate outcome will be if implemented. So, as far as the foundations or what I think to be core components of the bill– it’s fairness, simplification, and competitiveness. The immediate income tax will total nearly a quarter of a billion dollars and when fully implemented, it will be roughly a half a billion dollars.
Regarding fairness, every single income tax payer in the state of Arkansas will benefit from this tax bill if you pay income taxes. The bill will combine the low and middle tables. It will lower the top rate to 5.5% in year 2022, ultimately reaching 4.9%. And that 5.3% will be the final for the corporate taxpayers. And then it automatically adjusts the standard deduction to match inflation. And it provides a non-refundable $60 tax credit– am I ahead of you? Are we good?
Sample: Yes.
Dismang: And a non-refundable $60 tax credit for those making roughly $23,600. With a significant focus on working families, I believe the plan strikes a fair balance between working Arkansans and also job creators.
And to circle back, simplification. Currently, Arkansas has the most complicated tax structure in the country. We have three tax tables. This, again, will bring us back down to two. There’s some additional benefits that will be derived from doing that. There are individuals that have really received little to no benefit from our prior tax cuts. This will allow those individuals to share in those tax cuts that– where they’ve been left out previously. Additionally, every payer that makes above $39,700 will benefit from any future tax cuts on the top rate. That will also close the gap between the two remaining tables, which will, again, help us simplify our code as we move forward.
As far as being competitive, when we consider the mix of various taxes– so that’s sales tax, property tax, and income tax, it’s clear that we’re falling behind our neighbors as far as being competitive with our tax structure. And with an immediate commitment to drop the top rate to 5.5%, and, again, that commitment to reach 4.9% over the next three years, we will be closing that gap. And as far as, again, fairness. Every individual that pays– I just want to make sure this is understood– income tax in the state of Arkansas, will benefit from this tax bill.
As I mentioned earlier, this bill contains several provisions that are related to making sure that these cuts are carried out responsibly on a state level. First it– a very simple one, but it renames Long Term Reserve Fund to Catastrophic Reserve Fund. That will allow future legislators to understand the significance of that fund and the fact that it’s truly there for just emergencies. It also sets a floor for that Catastrophic Reserve Fund, newly named fund, of 20% of the prior-year spend in the state of general revenue. And also there are multiple triggers inside the bill that if there is any time that we have to tap into that Catastrophic Reserve Fund, the tax cuts will cease at that point. We’ll have to reconvene and make sure that we can afford to move forward.
Beginning in 2023, corporate rates will trail the individual income tax rates and be reduced to 5.7%, 5.5% in 2024, and 5.3% in 2025. The bill clarifies that the coronavirus food assistance program will remain non-taxable in the state of Arkansas. There’s some concerns that there may be a name change, so there is a paragraph in the bill for that. And additionally, it adjusts the elective pass-through income tax election. It allows that also to trail with the top rate, so that we will provide that benefit to those payers.
So, if you can, I’ll just go through the bill real quickly. That way if we come to any questions, we can kind of know where to go. And so again, there will be a little bit of a rehash, but if you go to Page 2 on your bill here, this is where we begin the renaming to the Catastrophic Reserve Fund from the Long Term Reserve Fund, and we discuss that 20% floor for that fund. The next several pages, in fact, until you get to Page 6 deals with the renaming of the fund. Page 6 is where you actually start seeing the changes in our tax code as they relate to the tables, and that’s going to carry on through the bill. Again, I think I’ve covered those. That’s the combining of the two tables and then also the adjustment to the tables and the top rate moving forward.
Inside each one of these, you’ll be able to see that there’s a– because we do still have two tables there will need to be clip adjustments. That’s carried out through those next pages. And then also the trigger language, essentially stating that if there is a withdrawal from the Catastrophic Reserve Fund, whether because of emergency or because of the will of the legislature that the tax cuts will cease at that point.
If you go to Page 14– 14, again, I’ll just keep moving through. That’s the 2024 tax cuts. But when we get to Page 16 in the middle on line 18, you can see an example of where on or after July 1, 2022, but before January 1, 2024, if there are any funds transferred from the Catastrophic Reserve Fund, then again, these will cease. We can move to– skip the rest of the triggers– page 19, section 6 is where we start discussing the changes to the corporate tax rate. And, again, just to recap, that’s going to be beginning in year 2023– a drop of the top rate to 5.7%, in 2024 to 5.5%, and ultimately settling then in 2025 to 5.3%.
On page 21 is where we discuss section 7. That relates to foreign corporations. Those are corporations that are operating inside the state of Arkansas but were organized outside the state of Arkansas. They will also benefit from the tax cuts that we have here. Page 23 Section 8 deals with the coronavirus food assistance program, which we discussed previously. Section 9 deals with the inflationary adjustment for the standard deduction. Moving to page 24, this outlines the $60 credit. You can see in this table here that that $60 credit starts phasing out at $23,600. It phases out for every $100 of additional income by $5 until it’s fully phased out at $24,701.
At the very bottom of page 24, section 11 details out the passthrough adjustment. Again, that’s just that the top rate or the taxation rate for the passthrough election will equal to the top marginal income tax rate, as we discussed previously. And then on page 25, section 12 is where we discuss further the triggers and then we get into the emergency clause. With that, I’d appreciate any questions.
Sample: Are there questions? Sen. Rapert.
Rapert: Thank you, Mr. Chairman. Mr. Chairman, I also wanted to say at the proper time, I have an amendment, actually to SB 1. But I want to just proceed to the questions.
Sample: Alright.
Rapert: At the proper time, I just wanted to make sure I made you aware of that. Sen. Dismang, obviously I support the bill. Co-sponsored– happily co-sponsored the bill. Thank you for all the work on it. I’ve got a few questions just to clarify. On the trigger part of this, has there been any kind of feedback from DFA about the probability or not that we actually hit the triggers? I know that’s a crystal ball. So obviously a lot of work has gone into the bill. We want to take it this direction. So my question is, were we forced to put in triggers?
Dismang: No, but that was a– I think it’s something that, in general, There’s plenty of discussion with the public that we wanted to make sure we didn’t find ourselves in a Kansas style situation. If you are a tax preparer and a taxpayer, predictability is critical. And one thing, we took that a little bit further. So, we actually had an independent review of both this bill and our economic condition. And that aligned pretty well with what DFA’s forecast was, which is, essentially, there’s going to be growth for quite some time in the state’s economy. We are able to afford this. And if we weren’t able to afford this, then I don’t think you’d see it before you today.
Rapert: Alright. Mr. Chairman, I’ve got a couple more here to follow up. The corporate tax cut portion of this, I’ve had people contact me. And obviously, I’m supportive. I’m a sponsor on the bill. But the discussion points or the pushback is, do you realize there really only a handful of actual corporations that are going to benefit here. Now, this is a good question for you because obviously I’ve got businesses, S Corporations. But they’re taxed at the individual’s rate, correct?
Dismang: Corporations? No.
Rapert: S Corporations.
Dismang: S Corporations are, not corporations.
Rapert: That’s right. So, what about the caveat or the pushback to us to say, well, if you’re wanting to cut taxes for individuals, cut taxes for individuals?
Dismang: Well, I would disagree with that. I mean, there are a number of corporations that operate in the state of Arkansas. I could call them legacy corporations. These were corporations that were formed before the time of S Corps and before the time of LLCs. Now there can be election made by a C Corp, but that’s quite a process to transition into an S Corp status or an LLC status. So a number of these entities have never taken that on and tried to make that change. There are plenty of family farms in the state of Arkansas that are still established and set up as C Corps here in the state. And I know that we like to– corporation, some folks want to call it a dirty word, right? ‘You know, we’re against corporations.’ Well, the fact is one person can own a corporation here in the state of Arkansas. And oftentimes, one person does own a corporation in the state of Arkansas. These are likely small businesses. Now if we’re talking about the size of the impact, DFA can allocate out– maybe they can, the size of the payer and who’s going to benefit. But I would argue that we’ve got a large number of people that still operate C Corps in the state of Arkansas that would derive a benefit from what we’re doing.
Rapert: Okay. And, hey, we’re all great Americans. We love business. Corporations are part of business. You can own multiple. But, so the corporate income tax portion of that– what is the total impact of again? Am I missing that here on– I don’t have your summary which you gave us, which looked better than what I’m looking at here, so.
Dismang: So the corporate reduction, again, is going to be, ultimately would reach in year 26 $57 million would be the total deduction for the corporate income tax.
Rapert: And that’s an annual basis?
Dismang: That’s an annual basis.
Rapert: Alright. I have asked– and I didn’t ask you, but I had asked DFA about tax credits. But you may know the answer because you’ve probably already looked into it. So who– do we have a list or have you seen a list of who all that we have already passed tax credits for here in the legislature in our current code? Whether it be manufacturers– these are some of the things we voted for. We support it– military retirees, etc. There’s a large list.
Dismang: Well, it’s a list of everyone if you’re just going to be quite frank about a credit. Every single payer in the state of Arkansas has a credit that they are automatically given on an income tax return. And so every Arkansan receives a credit. I think there is, to my knowledge, and maybe I’m wrong, but I don’t believe there’s a refundable credit established in the state of Arkansas. There’s some that are sellable and other means, but I’m not sure that any of them are fully refundable in excess of what you pay in taxation.
Rapert: Because it’s much like an earned income tax credit is what a refundable–
Dismang: A refundable tax credit– well, I mean, if you look– in a sense, it can be. Earned income tax is very specific on what it is giving the credit to, and that’s earned income. So if you read this bill, this is on your total income. I would contend that that $60 credit is actually going to benefit retirees with fixed incomes probably more so than any other population, mainly because once you’ve achieved minimum wage, you would be above in most situations the threshold needed to reach the credit. And so I think that’s who’s going to benefit from that $60– or that’s part of the population that will benefit from that credit. But again, that’s not earned income. That’s all income. That’s passive income. That’s dividends. That’s interest. That could be whatever goes into their passive activity, fixed income status, which is different from an earned income which has to be based on W2-type income or actual earned income. And so, again, this in no way is earned income, and at the same time it is not refundable. So, essentially, if you had $40 worth of tax in the state of Arkansas, you would only be able to take $40 of the credit.
Rapert: DFA is preparing that list for me. I don’t know if I’ll get it.
Dismang: Yeah, there’s political contribution credits. There are various water incentive type programs that tie back to credits. We have historic rehabilitation tax credits. There are a number of different credits that we’ve incentivized in the state.
Rapert: So you’ve answered me sufficient to say there’s a large number of credits that we have out there for any number of things. So, again, I support the bill. I’ll save my comments on the amendment to that point. Thank you, sir.
Sample: Sen. Teague.
Teague: Thank you, Mr. Chairman. Sen. Dismang, when I look on the green sheet on the impact statement, and there are five years’ worth of revenue impact, it’s about $1.8 billion cumulative. Isn’t that right?
Dismang: I haven’t totaled it, but I’ll take your word for it.
Teague: Well, my calculator wouldn’t cooperate. So it, maybe it could or maybe– but that’s a whole bunch of dang money. And you’re confident that revenues are going to continue to flow and we’re going to be able to afford that loss of revenue.
Dismang: I mean, any forecasting that you see out there, and I’m not seeing any contrary would indicate that the economy is going to continue to move. A portion of that is going to be back to inflation and we all need to be mindful of that growth related to inflation. But yes, I mean, at this point from what I see, and I’m no expert but just reading I feel that we will have a period of growth that will be able to sustain these taxes.
Teague: So in 2022, I can see us affording $135 million. But in 2026, $500 million’s a whole different number.
Dismang: I understand.
Teague: I appreciate it. Thank you. Thank you, Mr. Chairman.
Sample: Are there other questions?
Rapert: I have a motion for the amendment, Mr. Chairman.
Sample: Let’s hear your motion.
Rapert: The motion is– members should have a copy of the amendment– so my motion is that we would add the amendment that you have before you to Senate Bill 1. Mr. Chairman, this is supposed to be an exact replica of Senate Bill 9, which was on the floor today, which was simply the addition of law enforcement tax credit of $3,000, which was discussed at length on the floor. And also knowing that that was the possibility of having that be opposed, we had that in Senate Bill 8, which was in addition. And I’ve talked with Sen. Dismang. I had asked more than once that we try to add this to the bill. I talked with Governor Hutchinson about adding it to the bill. You all have heard we have nearly 50 co-sponsors in the legislature that are in pursuit of this as well. I’m not opposed at all to what we are doing. I just want to see us do something for law enforcement while we were actually doing this for everyone else. So that’s my motion, Mr. Chairman.
Sample: Sen. Teague, do you have a question?
Teague: Sen. Rapert, what’s the impact on this? I don’t–
Rapert: It’s 25.2 million. DFA is here. We actually had sent around– I don’t know if it made everyone’s information. But it’s 25.2 million. We actually discussed this and had testimony in here this spring, and we did not vote the bill. And Mr. Chairman, I deferred to your leadership at that time and I didn’t want to vote something where we didn’t know the information before the end of the fiscal year. We came out and of course now even have the federal rules. It’s my conviction and the conviction of many others that we can make room for this tax cut for law enforcement officers. This is why I’m using, honestly, every parliamentary maneuver I can to try to get it added to the bill. Because I gave my word, as have co-sponsors and I intend to keep my word. And this is why I’m pursuing every option that I have.
Teague: So is it 25 million the first year? Does it go up? Do we know?
Rapert: No, it– well, obviously–
Teague: Has DFA put out an estimate?
Rapert: It shouldn’t because it is a $3,000 full stop tax credit. Right? So for the $3,000 tax credit– that’s right. And it is refundable. I have members that are co-sponsors, Sen. Teague, because it’s refundable. The real trouble is those rank-and-file rookie law enforcement officers that are being paid an average of $28,000 or less. And they are literally having people have trouble to recruit people to the table. They also, and I can quote this because it was public– Sheriff Hobey Runyon, Sebastian County, had a deputy that came back to him and said, “As much as I want to stay, I have to quit. I can make more working in a fast food restaurant than I can serving in this position.”
I don’t want to go on. You know the points, gentlemen. These are people are out here serving us every day, running to the danger. It’s $25 million out of a huge tax cut bill that I’m for. And I’m saying we should make a priority out of law enforcement officer rank and file. There’s no reason we can’t. I also want to make note that the bills that were filed on the floor, Mr. Chairman, they were not busting open the session. That was– they were ruled germane. Then there was a vote, they weren’t. This amendment does not bust open a session. It doesn’t change anything. It’s the will of this body, and 18 members of the Senate can do anything we want to do. We know that.
So I’m asking, again, that we think about the fact that the governor’s task force said we should do a tax credit. And then deferred to them, we let that go. We talked it out, and we’re at this point. And I don’t have a good excuse when we’re passing a half a billion dollar tax cut to say we can’t afford $25.
Sample: Sen. Dismang.
Teague: Is it still my turn? Are you trying to run over me, Mr. Chairman? Not the first time it’s happened. That’s okay. So my– somebody in the hall told me that we had some deal to do something in the fiscal session. Anybody know anything about it?
Rapert: I will speak to that, and I will tell you since we’re going to ask the question, you’re going to get the answer. There was a meeting called without the prime Senate sponsor or the prime House sponsor of this bill, never any discussion with me one way whatsoever. And it was simply to defer. It was another attempt to get them to defer just like they’ve been asked to defer every other time– every other time. And so I’ll be honest with you, there’s a lot of people out there that don’t trust the promise to defer once again because it hasn’t been honored from the first honor to defer in the session. There’s no reason whatsoever. In fact, we could already be done with this if we really wanted it passed the law enforcement officer tax credit.
Teague: Thank you, Mr. Chair. Sorry, I didn’t mean to open up there anything.
Sample: Sen. Dismang.
Dismang: And what I’m going to ask, Mr. Chairman– so we’ve kind of went back and forth when answering questions speaking for the bill, you know, we introduced the earlier amendment. And then– at what point would you like me to make my comments in regard to this amendment? I mean, I really don’t have questions for Sen. Rapert, but I think there’s a lot that needs to be explained about the amendment.
Sample: Let me go to Sen. Hickey and then I’ll come back to you. Sen. Hickey.
Hickey: I guess first of all, I’m going to– if it’s okay, Mr. Chair– I’m going to ask Sen. Rapert, you just said this is identical to what you tried on the floor. And the will of the body of the Senate was that this was not germane. And now you’re bringing it to the committee to actually try to get it put on. It seems like it’s almost a little bit disrespectful to the will of the body of the Senate whenever we literally did that within the last two hours.
Rapert: Well, there’s an old saying: If you can’t make them see the light, make them feel the heat. Right, Senator? So the idea is that there’s a lot of people out here that are discussing this and there’s been a lot of backroom discussions without the sponsors of the bill, a lot of promises. And that is something that’s disrespectful to the prime sponsor of the bill as well as in the House here in the Senate. Now, yes, there was a vote taken. But I’ll be honest with you senator, there’s a lot of people that told me that they didn’t want to vote for a resolution to open up the session. I think, quite frankly, there was a little confusion today on whether they were voting to open up the session or not. Because the bills that were voted on today had nothing to do with extending the session, had nothing to do with opening up the session. It had to do with handling a law enforcement officer tax credit full stop.
And so it was a vote. Now the ruling of the lieutenant governor, which had basis behind it, said it was germane. We just decided, out of the blue, that it’s not. And now we’ve got a bill that’s on the floor that we’re going to be dealing with soon that most all of us want too, and guess what? He ruled it’s not germane. And you’re going to have to turn around and vote that it is germane. So we’ve got an issue here. This body can do whatever the heck we ever want to do when we’ve got the political will to do it. There was a promise to these law enforcement officers–
Hickey: I don’t– Mr. Chair, I have a question. I don’t– I don’t need this–
Rapert: [unintelligible]
Hickey: I’d like to answer Sen. Teague’s question. I don’t have anything to hide. Yes, there was a meeting in my office between law enforcement– that was sheriffs, chiefs, and maybe some people that were there for the counties. And yes, you were not invited. That is 100% on me. I did not want to invite you. I’m just going to throw it out there the way it is. Because what has transpired over this is, you’re right, you tried to bring this credit within the last session. There’s a lot of members down here, myself especially that’s included, do not think that the credit is good tax policy. There’s all type of flaws with the thing. If we’re going to develop this legislation, which– and I don’t believe that it’s anyone with the sheriffs’ office fault or the chiefs, but there was never a discussion had with myself in regards to this. There was never a discussion with the House that they were in the room also. I don’t want to speak for the governor here but I also don’t think he’s been included. So the thing was is there was no agreement that we were going to do anything by a certain time. But what we said was we were going to try to figure out a way to possibly get a wage raise instead of a credit and try to put some other safeguards in so that the cities and the counties, that we could make sure that they were not going to try to supplant instead of supplement. Just multiple type things that we need to consider instead of just some haphazard thing that’s being thrown out here, quite frankly, as a political game. And I’m going to– yep– I listened to what you said on me, and it’s disrespectful to the Senate that you’re bringing this back in here after the Senate has just done that. So with that, I’m going to just hush up and we’ll just take it from there.
Rapert: Mr. Chairman, my response to that, first of all, we can disagree–
Dismang: We’re in discussion at this point, and I’ve been waiting patiently.
Sample: Sen. Rapert.
Rapert: Can I respond so we can get that out of the way and not lose track?
Sample: Sure, without a political speech.
Rapert: Yeah. Well, it’s all political up here, and so we try not to be. I found out that when people agree with you, they think you’re passionate. When they disagree, they think you’re arrogant. So I get your– I get what you’re– what you’re saying. Bottom line is this was in a report of the governor’s task force in writing. It’s been well publicized. It’s been supported and touted as this wonderful result of months of work by 30 people here in this state. We’re 49th in pay in the whole country and so in terms of this, I met with the governor face to face. You can bring him here to testify if you’d like to. Gov. Hutchinson and I met with Rep. Slape. You have resolutions that have been passed by just about all– maybe all of the major counties in the state probably have passed resolutions in your districts in support of this. We have cities passing resolutions, we have counties passing resolutions. You’ve probably got more than 50 people that want to pass it by now here just since this morning. This is nothing that came up out of the blue. This was discussed right here. It was testimony given right here. And not one of you mentioned anything about it being bad policy when we discussed it.
Dismang: I would contest that.
Rapert: You just said defer on that. Now you may have thought it. But if you think it’s bad policy, the bottom line is, if you don’t like tax credits, Sen. Hickey, then I guess you can get rid of all of them that you’ve got on the books now.
Sample: Alright. Sen. Johnson.
- Johnson: Thank you, Mr. Chairman. Sen. Rapert, I agree with you that the Senate did not vote to not hear amendments in this committee. What we voted on was another bill and whether it was germane. Now I realize the result might come out exactly the same, but procedure does matter and I believe that it’s important that we do this. I’m very concerned that– and I’m going to pause for an aside. I want to thank Sen. Dismang and Sen. Hickey and everyone else that worked so hard on this bill. But in appreciating your hard work I didn’t hand ya’ll my proxy on how I thought the final tax bill would be. I hope the whole idea that we’re having a committee meeting right now and that we’re deliberating would be to make the bill better or to cover things that we think maybe it failed to properly cover. If we were going to be forced into a situation where for something to be consistent with the governor’s call, we just had to take it the way it was filed, as far as I’m concerned we shouldn’t have any committee meetings. The bill should have been introduced and immediately referred to the calendar. But that’s not how we normally operate. We get to deliberate. We get to talk about it. I just believe that this is an issue that’s time has come. I appreciate Senator Rapert bringing the amendment but most importantly it’s important that the Senate and this committee have input as to what the final form is. And I again close by thanking you both for the tremendous job you did, especially on the text rate portions of this bill.
Dismang: Thank you. So a couple of things, to your point. There was input given. As y’all know, I despise co-sponsors. Because if there needs to be a change, I feel like it’s my responsibility that each one of those individuals that sponsored that bill, that put their name on it, should have the chance to take it off if they don’t like what’s been added. I went through this bill line by line, more than I could have ever– trust me, more than I ever wanted to To make sure that there weren’t any flaws, that we had covered all bases. And then I presented it to the members. Y’all looked at it. You asked me questions and I responded. I gave you all the information that I could possibly put in there, and you said, ‘you know what, I want to be a sponsor of that.’ You didn’t say, ‘I want to be a sponsor of a changed bill.’ You said, ‘I want to be a sponsor of this bill.’ And the 25 other members that were on this signed it to be a sponsor of this bill, not a changed bill. And I would disagree that this is a different circumstance. We are in a special session. This was all given to you well ahead of time. And again, you agreed to be sponsors to the bill as these others did as it was written.
This is a hostile amendment. I can remember more than one well speech in which there was a hostile amendment presented to a member’s bill that Senator Rapert went to the well and threw an absolute fit that we were going to do that to someone else’s bill without their permission. The first I knew about this amendment was when I sat down right there and Senator Rapert told me that he was going to put a hostile amendment– now he wouldn’t term it that way– on the bill. Again, a bill that’s been co-sponsored not just by Senate members, but House members. We’re going to change something that everyone agreed to, including you too.
Nope, you don’t get a chance to respond. I had to listen to it for a while.
And I’ll say this. I’ve had lots of conversations with law enforcement myself. And I’ll tell you what they’re tired of. They’re tired of being paraded up on a stage and told that we’re backing the blue and then stand in front of them. They’re tired of a social media ad going out that the symbol for back the blue is half of what it is for the campaign. When I talked to law enforcement, what they said was they recognized the flaws. This doesn’t deal with retirement. They don’t get credit for their retirement on this $3,000. They’d like that. There are other states that utilize stipends and other areas that they want to explore actually when you talk to them. So I believe there are options. I don’t believe this is good policy, and I believe you’re trying to attach bad policy to a bill that has been very thoroughly vetted.
So I appreciate the time. I appreciate the back and forth and whatever it may be. But these other members didn’t agree to this. This is disrespectful to the process, regardless of how we want to phrase it.
Caldwell: I just have a comment. The fiscal impact you say is $25 million, but as I read the bill, the people you don’t have listed here would be members of the Arkansas Game and Fish. Game wardens would qualify, people that are in Parks and Tourism that are the wardens would qualify as law enforcement officers. We brought that in a bill this last session where they could carry their firearms off the park and be law enforcement officers throughout the state. You’ve got Department of Corrections officers, so I’m going to question whether or not our fiscal impact statement is correct. The other thing would be on page 2 paragraph E. A federal law enforcement entity, why in the world would we be giving tax credits– how far is that going to go and who are we going to give tax credits to.
But the biggest problem I have with this amendment is that we are beginning an earned income tax credit. We’re going to give people money back– tax money back that they did not pay in, and we defeated that bill in this past session. The other thing is if we do it this way and we do that earned income tax credit, and we’re giving say $2,000 back to a police officer on taxes he didn’t pay, that’s just going to encourage the cities and the counties not to raise their salaries. And it’s just bad tax policy, just plain and simple. But really the next thing that’s going to happen once we give it to law enforcement is the fire folks are going to come in and want the same thing. The teachers are going to come in and want the same thing. Members of the ARDOT crews are going to come in and want the same thing. I think we need to have a good, clean tax policy of how we can lower taxes for everyone. We see people coming out trying to take our income tax to zero. And I think that’s the best tax policy we can have and not try to pick winners and losers. Thank you, Mr. Chairman.
Sample: Sen. Rapert, I’m going to allow you to close.
Rapert: Right. If the chairman wanted to allow, DFA could speak to those questions, Sen. Caldwell. Those are good questions. We were advised during the spring that you could not– you could not exclude federal full-time law enforcement officers. We were told you had to include them in the state. And DFA can respond to that because they are the ones that pointed it out to us that we had to do it. The full-time law enforcement officer actually is described in the bill starting there on page 1. It talks about the law enforcement agency and you did have some people in there, of course, a law enforcement entity of the state of Arkansas including without limitation. There were some that were concerned like the airports, Sen. Caldwell. And so they had asked that we want to make sure, so including without limitation, it did describe them. But what I’ve been advised by DFA, and this is the result of the impact statement, that this includes all full time law enforcement officers and had to include, couldn’t exclude the federal is what they told me. In terms of closing for the bill, it seems like Sen. Caldwell may have another question, Mr. Chairman. But I’m ready to close whenever you want me to.
Dismang: So we’re talking about giving credits to also the federal law enforcement. This isn’t just municipalities and our– and our counties?
Rapert: It’s, it’s– I think it’s a total of a little over 7,000 if I’m not mistaken. But yes, they told us that we could not exclude them.
Dismang: Would we have to give them a stipend if we went a different route? If we were to increase pay or do some supplementals?
Rapert: No, no. Sen. Dismang, that’s a different question–
Dismang: And then that would mean that our state folks, our actual muni folks and our county folks would actually be able to get a greater benefit with the same amount of dollars. Would that be– that would play out right, wouldn’t it?
Rapert: Actually, a refundable tax credit is more to them from a tax basis than if you gave them $3,000–
Dismang: No, I’m saying that if we don’t have to pay a tax credit, a refundable tax credit to federal law enforcement officers, then that’s more money that is divided out fewer times, which means more money for our in-state folks. I’m not saying these folks are out of state, but I thought the focus was– this is news to me right now, and I bet it’s going to be news to your colleagues too.
Rapert: No, it’s in the bill.
Dismang: It’s going to be news to your colleagues that the city and county folks weren’t getting the bang– I mean, you’re diluting it down. Is that a correct way to look at that? You’re diluting down what the total dollar amount would be. Just say it’s x number of dollars, we’re increasing the number of people and diluting down what’s going to be available to each one. Is that correct?
Rapert: I’m going to wait until you’ve finished. Yes. The correct that– you had to include it. So that’s not diluting it down. The bottom line is that Arkansas– and I will close if you want me to, Mr. Chairman. In closing, this is a matter of political will. It’s $25 million when we’re talking about $50 million to US Steel, talking about half a billion dollars for all of us, and I’m happy with all that. And I know you may think it’s hostile. It’s not meant to be hostile because I like everything you’re doing in the bill. I just think there ought to be room for $25 million. And it’s the first time that I’ve ever seen in a long time that parliamentary maneuvers are considered disrespectful to this body. If you don’t like them, change the Senate rules. But until that such time, we all have the ability to use parliamentary maneuvers any time that we want. And you know what? I can stand here and sit here and so can many others feeling good about the fact–
Sample: Senator, let’s talk– Senator– stay on the bill.
Rapert: — that we are standing up to our word. It’s in the governor’s task force recommendation to do a tax credit. And it calls for the state to do our part and the cities and the counties to do their part. This is real simple. All of us are getting a chance to say do we think we can squeeze out $25 million to help law enforcement? That’s all I’m asking. If you don’t like it, that’s fine. That’s respectable. But I don’t think you’re disrespectful because you disagree with me. And so I object to the connotation of that. With that, I’m closed, Mr. Chairman. I’d ask for a motion and a second.
Sample: I have a motion from Sen. Rapert.
- Johnson: Second.
Sample: He did make a motion. And I have a second from Sen Johnson. Any discussion on the motion? Seeing none, all in favor say aye. All opposed, no. Senator– we’ll roll call it. Call the roll.
[Vote on Sen. Rapert’s amendment
Yes: 2, No: 4, Not voting: 1
Yes: Rapert, M. Johnson
No: Teague, Caldwell, Hickey, Dismang
Not voting: Ingram]
Sample: The motion fails. There was two no votes– I mean two– four nay votes, two yea votes, and one not voting. The motion failed. Alright, Senator, are you ready to close on your bill?
Dismang: With respect to the other folks in the room, I’m not sure if we have people signed for or against the actual bill. I know we kind of got off track.
Sample: Oh, we do. We do. I apologize for that. [speaking away from microphone] On the fiscal impact? We have one here on the desk. Paul, would you come up, please? Thank you. I appreciate your brevity. I think overtime starts at 12:01. Mr. Gehring, if you would, state your name for the record and the question is about the fiscal impact on SB1.
Gehring: Thank you, Mr. Chair, members of the committee. Paul Gehring, DFA.
Sample: Sen. Teague.
Teague: Thank you, Mr. Chairman. So can we afford $1.8 billion over five years?
Gehring: Thank you, Sen. Teague. Certainly as Gov. Hutchinson took office in 2015, his goal was certainly to bring tax relief to individual taxpayers in the state of arkansas.
Teague: That’s not really an answer.
Gehring: I understand. So, and the cornerstone of providing income tax relief is to provide measured relief that can be absorbed by growth in the economy, as well as management of the budget and making sure that state services are met. So certainly with regard to the revenue impact of Senate Bill 1, we are very confident that the revenue tax cuts that provide controlled, incremental reductions to the top rate for individual income tax, as well as for corporate and providing the relief through the $60 tax credit And the other provisions of the bill certainly can be absorbed through the growth of our economy, tax collections, as well as the future needs of the budget.
Teague: Thank you, Mr. Chairman.
Sample: You’re welcome. Members, we have nine people to speak for or against this. Before we start, I’m going to limit the time since we’ve got other committee meetings that we’ve got to attend. And so I’m going to give each one of the people 2 minutes per side to take and make their points. And the first one I’m going to call is Allie Tomlinson for a no. Ms. Tomlinson, as I stated, we’re going to give you 2 minutes. If you would state your name and who you’re representing here and we’ll start the time.
Tomlinson: Thank you, Mr. Chair. My name is Allie Tomlinson. I’m from Conway. And I’m with the Arkansas Alliance for Disability Advocacy.
Sample: Okay. Time starts now.
Tomlinson: Thank you. So thank you all, committee members. I’m actually here just to share a little bit of information on this, not necessarily a no. I just want to remind you how this is going to impact people in Arkansas. First and foremost, I am a mother of two children. One of my children is 15. He has chronic health conditions and intellectual developmental disabilities. So I really want to remind you that this is actually disability policy. So I don’t think we think of it like that when we come into this room and start talking about cuts. But every piece of policy and every piece of legislation that we work on is actually going to impact people with disabilities. And we need to remember that. So any type of cuts that we are going to make is going to impact services for individuals in Arkansas that need those services to live. So right now we actually have 4,800 individuals that are receiving community and home based services and we still have 3,000-plus families that are on the Arkansas waiver list. And they have been there for years. I think that Arkansans deserve to live a life of independence, a life of dignity, a life full of quality. And I think that every single person in this room can really agree with that. So making cuts are going to hurt and impact those services in a negative way. So I hope that when we leave here today we can all really say that we have championed for individuals with disabilities that are in Arkansas. Thank you.
M Johnson: Mr. Chairman, point of order.
Sample: What’s your point?
- Johnson: My point is she’s not speaking to the bill.
Sample: She did. I’ll rule that she did.
Tomlinson: Do I have any more time left?
Sample: No.
Tomlinson: No? Okay.
Sample: No, your time is up. Ashley Simmons. Ms. Simmons, before I seat you, you said that info– this is to speak for or against this bill. You’re sharing information? Is this– you’re speaking for the bill or against the bill? That’s what we’re hearing right now. We’re hearing testimony for or against. Against. Alright. Sit down. Give us your name, who you’re speaking for and then I’ll start the time. I gave a little bit of latitude. I want you to know that I want to hear about against the bill.
Simmons: Okay. My name is Ashley Simmons. I’m the project coordinator for Community of Champions with the Arkansas Alliance for Disability Advocacy.
Sample: Okay, and your time starts now.
Simmons: So, I have two little boys ages 6 and 9 who are disabled Arkansans. Under the governor’s proposed tax plan, Arkansans who make under $22,000 a year, which means 20% of the state would see no benefit at all. One in three Arkansans are disabled, and 30% are living under the poverty level. I understand this is education you have, and I’m acting as a reminder to you. Please understand you are representing all Arkansans with your actions, not just a chosen few. People with disabilities have a right to look up to the Arkansas legislature and see a body of people who not only have their best interests at heart, but a body of people who will actively support them with every policy they vote on. Please take it from a mother who truly understands the benefits of having services available in our state that allows us to access medical care both of my sons’ quality of life have depended upon. The reality of a family with education making $70,000 a year, taking care of two medically fragile children with disabilities, and living in a state with lower tax revenue meant the services offered were few and far between resulting in us losing our home and having to uproot our lives. So I know firsthand that the reduction in tax revenue means less money for our state budget and that means less support for the people who need it the most. Thank you.
Sample: Thank you. Sen. Johnson.
- Johnson: Ma’am, thank you for your testimony. Do you realize that there is nothing in this bill that would cut any services to any disabled person?
Simmons: I– from what I’ve read, I understand that there’s nothing that outlines it. However, having lived the experience from another state–
- Johnson: Well, I just want to clarify that this is about cutting taxes, income taxes–
Simmons: I understand.
M Johnson: Now, we the General Assembly– I use that collectively– may reprioritize things, and certainly the issues you brought up are things that I support funding and I can think of things out there that we fund today that maybe I would lower their funding and raise the funding for the things you mentioned. But I allowed the other witness to go before I made my point of order. And Mr. Chairman, I respect this lady too, and I think she makes valid points. They are just not relevant to the bill before us, so I ask that we keep all of our comments on the bill and not on some greater good, which, it is a good, is not relevant to the discussion we’re having today. But I do appreciate you taking the time to come speak to us. Thank you, Mr. Chair.
Sample: Thank you. Sen. Clark. Okay. Well, you are the next person on my list because you were a for, so we will proceed to Rich Huddleston who is speaking against the bill. Mr. Huddleston, you’ve heard my instructions to give your name and who you’re speaking for and you will have two minutes after that.
Huddleston: Okay. Rich Huddleston, executive director, Arkansas Advocates for Children and Families.
Sample: Start the time.
Huddleston: Alright. We oppose the tax cut package for several reasons. One, we believe that the cost of the package is going to be a lot more than what DFA is estimating. According to a study by The Institute on Taxation and economic policy, they estimate the cost of the plan will be $600 million, not $500 million once it’s fully implemented. Second, we also oppose the plan because we think it unnecessarily favors the wealthy. According to the same analysis, the top 1% of taxpayers, those making more than $500,000 annually, would receive about 30% of the total benefits of the tax cut. The average Arkansas in the top 1% would see their taxes go down by about $10,000 annually. In contrast, the lowest 20% of taxpayers, those making less than $22,000, would receive only 1% of the total benefits of the tax cut package. The bottom 20% would see an average tax cut of less than $20. And out-of-state corporate shareholders are also the big winner under this plan. Again, according to ITEP, the corporate tax cut would ultimately get passed along to shareholders, would mostly be captured by out-of-state corporate shareholders. They estimate that about 81% of the benefits trom the corporate tax cut are actually going to flow out of state to out-of-state corporate shareholders. They think that’s about– in their estimate about $60 million that would be leaving the Arkansas economy. And then finally, we disagree that — I mean, if you’re going to take $600 million out of the revenue stream, that is money that could get spent on the state budget for things that support children and families. And so we don’t agree with the argument that that’s not germane. We think–
Sample: Mr. Huddleston, your time is up.
Huddleston: Alright, thank you.
Sample: Thank you. Michael Thornton? You’ve passed. Is that correct? It’s hard for us to hear from there. Abbey Hughes? Ms. Hughes, before I recognize you, you didn’t state whether you’re speaking for or against this bill. I need to know that right now. You’re speaking for it? Thank you. You’ve heard my instructions. Please give your name, who you’re representing, and I will start the time clock. Push your button. Make sure the red light’s on.
Hughes: Abbey Hughes from Hot Spring County, currently a resident in Pulaski County. I’m here on behalf of the Winthrop Rockefeller Foundation and the Arkansas Asset Funders Network. Thank you so much. I’d like to share a letter that the Winthrop Rockefeller Foundation board of directors wrote to Gov. Hutchinson which applies to this body. As members of the Winthrop Rockefeller Foundation board of directors, we are writing to urge you to keep hard-working Arkansans top-of-mind as you convene lawmakers. We are grateful for your prudent leadership of our state’s budget that has resulted in nearly $1 billion of surplus. Yet we know nearly half a million Arkansan households still can’t make ends meet. Hard-working Arkansans have real needs, and tax credits like the low income tax credit that is part of Senate Bill 1 is a real solution. Credits such as these are targeted tax relief that put real hard earned money back into the hands of working Arkansas taxpayers. Last year, the Winthrop Rockefeller foundation and Entergy released a report on Alice in Arkansas that shows that 46% of households in Arkansas are Alice– Asset Limited Income Constrained yet Employed. Alice Arkansans are the hardest-working residents and can be found in every town, every city, and every county in our state. Alice workers are our essential workforce that keep our state economic engine running. Yet, while they work hard and put their lives on the line, they aren’t always sure they can put food on their table. It is time for Arkansas to stand up for Alice and make hard work work for all. Governor Winthrop Rockefeller was committed to economic prosperity and courageous in his pursuit of systemic change that benefited all arkansans. During your tenure in office– that being Governor Hutchinson’s– you have also worked hard to make sure our state is competitive. Yes– Thank you.
Sample: Mr. and Mrs. Freeman. I’ll allow one at a time. Okay. Before I seat you, I’ll do you the same way that I’ve done everyone else. You stated your position was information. You either speak for the bill or against it. Against the bill. Okay. If you would, identify yourself and who you’re representing, and I will start the clock.
- Freeman: Charnette Freeman.
- Freeman: Frederick Freeman. Representing ourselves.
Sample: Okay. Two minutes.
- Freeman: Yes, sir. Thank you very much. Good afternoon, Senators. Appreciate this opportunity. I’m Frederick Freeman and Charnette Freeman. We are here on behalf of the disability community. Charnette is a 30 year old young lady Who has been on the DD list for a number of years. The question was just raised, how does this bill affect that? This bill, as mentioned by Mr Rapert, has an opportunity to fund other things. It’s what it does. That’s the impact, and that’s the reason we’re against it. We think, and the others in the room think, that helping to mitigate, get rid of the other individuals on the disability list, is a great use of funds instead of a tax cut. And that’s the reason that we’re here speaking against the bill. Charnette was put on the list when she was 24 years old. Six years ago, she was number 3500. She’s currently number 1500. I think as Arkansans and legislative body members, that we can do a lot better than that. That’s the reason we’re against this bill. This is a lot of money, a half a billion dollars over 4 years. And I’m told it takes about 37 million dollars to clear up the DD list. We’d appreciate a modification of the bill, therefore clearing up the DD list. I’d entertain any questions if asked.
Sample: Sen. Rapert, we’re running 30 seconds on this, so you can ask your question quick.
Rapert: Mr. Freeman, thank you. Absolutely appreciate what you say and you make a great point we’ve held before. My question is have you been given any assurances at all that there’s any effort being made to completely eradicate the DD list, which is something that we once said we wanted to do here in this legislature.
- Freeman: I’ve not heard of any efforts of late. I’ve heard of promises over the years to the extent that this is the first time I’ve come and spoke about it because I’m tired of the promises not being fulfilled.
Rapert: We’ve helped before Mr. Chairman. We should probably, but we should probably get this back up on the list again because it’s important.
Sample: Okay. Your time– thank you. Dr. Evans? Dr. Evans, before I seat you, I’ll ask you the same question that I’ve asked everyone else.
Evans: I’m against. Against.
Sample: Okay. State your name, who you are here for.
Evans: My name is Dr. Syard Evans. I’m the CEO of Arkansas Support Network and the president of the Arkansas Waiver Association.
Sample: Alright, your time starts now.
Evans: Okay. I’m excited to hear that commitment from you, Senator Rapert. I’m here to, to capitalize on what you’ve heard from the disability community today and the impacts of this bill. And I want you to know that what we’re facing today in ARkansas is different from what we were facing this time last year or the year before. The homing community based workforce is crumbling out from underneath us to the same types of issues that you raised around law enforcement, we are not able to support those folks on the waiting list with the reimbursement that are in place today. We are currently struggling to be able to support the folks that are receiving waiver services and disability Services. And taking this amount of revenue out of our economy means that we ensuring that the additional funds that are going to be necessary to stabilize a workforce to support Arkansans with disabilities, we’re losing that opportunity. Not only that, but we’re talking about thousands and thousands of Arkansas that show up every day and work hard and are forced with making decisions about quitting their jobs because the cost of putting gas in their car, the insurance for their car, and being able to provide daycare for their children is more than what they’re being paid to do meaningful work, to support Arkansas with disabilities in their communities. It is also not only direct support professionals in the disability community. We’re seeing this with behavioral health. We’re seeing this with adult and aging services. We’re seeing this with services that we will all need– some of us in this room today sooner than others in the very near future. We don’t have the resources as providers to be competitive in the new world that the pandemic has created. And we would ask that instead of giving the wealthiest Arkansans additional money, that we put those into services. Thank you.
Sample: Dr. Evans, your time– Thank you. Rep. Rye? He’s not here. Okay. So, we’re down to a motion on the bill. You’re closed? And do I have a motion?
Dismang: Motion do pass.
Sample: Motion do pass. Sen. Hickey second. Any discussion on the motion? All in favor, say aye. All opposed, no. The motion passes. Okay. Sen. Dismang, you’re running SB 2.
Dismang: Thank you. I don’t– I don’t think this bill has any amendments coming. Alright. Members, this is– this just strikes some language that was not consistent on the appointment process for the new tax commission. By striking that language, it brings it in line with the rest of the bill.
Sample: Are there questions or discussion on the bill? Are you closed?
Dismang: I’m closed.
Sample: Make a motion? I have a motion do pass. Sen Johnson, second. Is there any discussion on the motion? See, all in favor say aye. All opposed, no. Motion passes. Sen. Wallace, if you would. Where you at? Sen. Wallace, we have about 10 minutes. You think you can get this out of here? Alright. I like to hear that. Sen. Wallace, you are here to present SB 10.
Wallace: Thank you, Mr. Chairman. Colleagues, I’m going to use the words positive cost benefit analysis. Remember that because I’ll probably forget it two or three times as I go through this. I’ve worked with this bill. AEDC has worked with me. DFA has worked with me. The governor’s office. This is a really good bill. We have the opportunity to bring a great addition to the state of Arkansas. A capital investment of over $3 billion sunk in the ground in Northeast Arkansas. That’s in addition to the $2.2 billion that U.S. Steel, Big River Steel has already done. A total investment of $5.2 billion that they’ve invested in the state of Arkansas. And by the way, that would be the second largest Economic Development package done in the United States this year. The problem we’ve got is there’s two other states chasing this also– Alabama and Mississippi. We are in the driver’s seat and we are in the lead, provided we can just do a few things that will help out.
This development is going to bring 700 jobs, direct jobs, working for US Steel, men and women making $120,000 a year. It’s going to bring an additional 200 jobs of companies that are vendors of US Steel, and those folks will make an average of $60,000 a year. These steel mills came to Arkansas in ‘88. At that time, the minimum wage was about $3.30. Folks that grew up on the farm, myself being one of them, guys that were working for farm labor were making about $3.30 an hour. And nothing changed until the steel mills came to Mississippi County. Since then, these young folks, maybe with a year of college, maybe with maybe two, maybe none, just the ability to work hard, be drug free and show up for work every day are making $100,000-plus a year. That’s turned into new homes, new cars, new business and families enjoying a good life in a part of the country that was pretty dog-gone poor for a long time.
What’s it going to cost us? We’ve already talked about the $50 million. But it’s going to cost us some tax credits. But it’s kind of like when you grew up on a farm of– you’ve got to prime the pump. You’ve got to put a little water into the pump to prime the pump to get gallons of water out. That’s what we’re going to do now. That’s what we did starting back in ‘88. We helped prime the pump. We’ve done this twice before, and it has shown an enormous financial benefit to Arkansas, especially Northeast Arkansas. I’m coming to you asking you to do this one more time.
Sample: I’m going to let him finish this.
Wallace: These tax credits will average $11 million a year for 14 years. We have the ability to purchase it back at a 20% discount. That comes out to $8.8 million a year. They don’t get these tax credits unless they pass a positive cost analysis. This will be done by AEDC and done by the Department of Finance so that there’s a money back guarantee on that. That’s what we’re looking at. In addition to that, if you take a look, those 700 people who are working making $120,000 a year now, which will probably be $140,000 or $150,000 14 years from now, that comes out to $84 million a year in salaries. With the 200 making $60,000, that comes out to another $12 million. That’s close enough to $100 million to call it $100 million. 5% tax on that– state income tax is another $5 million a year that will be coming into the state. Not to mention property tax or sales tax. This is a good deal. We have done this twice before. It has been very successful. We need to run this same play again. And with that sir, I will answer any questions.
Sample: Are there questions? Sen. Johnson.
M Johnson: Sen. Wallace, these 700 jobs, these individuals will be paying Arkansas income tax, won’t they?
Wallace: 70% of the people who work in the plants now pay Arkansas income tax.
- Johnson: So we’re getting that revenue back in addition to the other quality of life things you mentioned?
Wallace: Yes, sir.
- Johnson: Alright. Thank you for bringing this bill, senator. Thank you, Mr. Chair.
Sample: Are there other questions? Sen. Teague, I’ll hear your motion now.
Teague: Motion do pass.
Sample: I have a motion and a second do pass. Is there any discussion on the motion. Seeing none, all in favor say aye. Opposed, no. Congratulations.
Wallace: Thank you, Mr. Chairman. Thank you.
Sample: Is Sen. Garner over there?
Garner: Right here.
Sample: Sen. Garner, we’ve got to be in other committee meetings in 10 minutes. I’m going to recess and come back after our other meetings.
Garner: The chairman’s right here. I thought that it was either a, the 3 o’clock timeline or after this meeting. That’s what the State Agencies– I’m co-chair of that and–
Sample: Was that the–
Rapert: Since I’m here– actually I’d told them that we’d adjourn at 3 or upon adjournment of your committee, senator. In fact, your bill is in our committee. So, we’re going to have to hang around. So if it pleases you, just you can go ahead and handle this.
Sample: Alright, you’re here to present SB 11.
Garner: Correct. And I’m not special enough to for there, senator. Tell me when you’re ready.
Sample: I’m ready.
Garner: Last session, I filed a bill to eliminate the income tax in Arkansas. This has been a stated policy of many members of the policy committee in Arkansas. We know that lieutenant governor Tim Griffin led the public debate about this roughly a year or two ago. We know that attorney general Leslie Rutledge has talked about doing a constitutional amendment to make that possible in Arkansas. And we know candidate for governor, Sarah Huckabee Sanders, has also expressed the desire to eliminate income tax. This is something we have to do. Frankly, we’re getting our backsides whipped by Texas and Tennessee and the 0% income tax that they have. We know that this not only drives economic condition, it becomes a recruitment tool for labor and for talent to move to Arkansas. This has shown huge benefits across the state that we have not seen in other tax cuts that we have done, in my opinion. When I filed and ran that bill this last session, I remember looking in the committee’s faces here and remember seeing some snickers or some bad looks. How dare I bring a tax cut that couldn’t be done. The naysayers said that you can’t do that. It’s too much money. It’s not possible to cut our income tax to 0 in Arkansas. I remember one of our former colleagues decided to get chippy on twitter and say that you can’t do it, that it’s impossible–
Sample: Senator, would you stay on the bill, please?
Garner: Say what?
Sample: Would you stay on the bill?
Garner: Yes, sir. I’m explaining the pretext to the bill before I get to the initial part of the bill.
Sample: I would rather hear the bill.
Garner: Okay, well, I’m trying to illuminate the discussion before and express the importance of this bill and why I think it’s pertinent we bring it right now. Does that meet your criteria, Mr. Chairman?
Sample: I would– I would prefer that you state the bill–
Garner: Okay, back to my point–
Sample: –and we will have the discussion after that.
Garner: Okay, so when I did that, there was laughs and other things like I said from members of this committee. After today, you can’t laugh. This bill puts us on the path to 0% income tax in Arkansas. This is a real substantive bill that could do that and in the next 10 years when my kid’s going to the workforce, they wouldn’t pay one penny on their income tax. And how would you do that? First this bill eliminates– almost 50% of the taxpayers would pay 0% income tax. I’ll say that again. Nearly 900,000, 50% of taxpayers would go from paying income tax to 0 the second this bill passed.
This bill would take the lower bracket as we already have and move it up to $26,500. Now why that number’s important, the per capita income in Arkansas due to this last census is $26,500. Every single one of them, by definitionaly the average Arkansan, would go to 0% income tax. Every other taxpayer would find that their first $10,000 of their money would go to 0 as well. So not only would you cut income tax by 50%, you would also raise the first $10,000 to 0. What that means is somebody who makes $40,000 a year, their first four months of working, they wouldn’t be working for the government. They’d earn that themselves. The largest tax greek would affect the working middle class as we flatten the rates across the board and lower from 5.9% to 5.5% that middle tax bracket. The top tax bracket would go to the first $10,000 exempt as well. The only number they’d have to worry about is their top rate moving from 5.9 to 5.7. This would cost more up front, but in a 5-year average from Sen. Dismang’s bill would actually cost less allowing us to focus on reducing income tax in other areas as well.
What I like about this bill is a three-pronged approach to put us on that path to make sure we cut taxes to 0. First it raises the bottom, that lower income tax. You can continue to raise it up to $30, $40, $50,000 to get to that 0% income tax. Secondly, it cuts out the middle as it flattens that and reduces that first 10,000. And lastly, it skims off the top as you move that top rate down as much as possible. There’s no triggers. There’s no corporate income tax reduction for foreign companies that incorporate in Delaware and do business in Arkansas. There’s no welfare rebate given to people. They allow them to keep their own money. This bill puts us on a path that I discussed before to getting to 0% income tax. It’s no longer a fantasy. It’s no longer a joke. It’s no longer something we can ignore. This would do that if we start today and continued on that path moving forward. By the time Lincoln, my son, enters the workforce in 10 years, he could do that with paying 0 tax. And with that, I’ll take any questions.
Sample: Sen. Garner, I’ve given you the indulgence to present your bill, but your bill does not carry a fiscal impact, the rules on this committee is we don’t hear bills without a fiscal impact.
Garner: Well, BLR has examined this at 37–
Sample: DFA gives our fiscal impact, and so with that, thank you, sir.
Garner: Well, did DFA allow a special session? Or was this– that rule applies to a special session would have been almost impossible to get that in in time.
Sample: If we– if we do not have a fiscal impact, we’re not hearing the bill. That’s the rule of the committee. Thank you. With that, we are adjourned.