- Associated Press - Wednesday, March 25, 2015

LITTLE ROCK, Ark. (AP) - Arkansas House members advanced a bill to reinstate a capital gains tax break Wednesday, one day after a committee rejected a tax cut to help thousands of low-income residents.

The proposals came late in the session from lawmakers eager to add to a middle class tax cut pushed through by Republican Gov. Asa Hutchinson. The House Revenue and Taxation Committee rejected a credit for Arkansans currently receiving the federal earned income tax credit on Tuesday while a Senate leader Wednesday pushed for a tax relief for veterans.

The Legislature repealed part of a 2013 capital gains tax break as part of a $102 million tax cut Hutchinson signed into law last month. Hutchinson previously said he’s looking into changing his $5.2 billion proposed budget for the coming year to accommodate the capital gains tax cut, now headed to the Senate after a 68-17 vote.

The bill would raise the percentage of a capital gain that is exempt from the income tax to 50 percent, which would cost the state $6 million in the coming fiscal year and $11 million the following year. House leaders have said the exemption could be paid for through normal revenue growth.

The proposal drew criticism from some Republicans as well as from Democrats, who said the cuts would help the richest Arkansas residents.

“It just bothers me a bit when we say can’t afford any for the low income folks but we can afford it for us fat cats,” said Rep. Kim Hendren, R-Gravette.

Sponsor Rep. Matthew Shepherd, R-El Dorado, said the intent of the bill is to keep job creators from leaving for Texas, Florida or other states. He said the rollback of the 2013 capital gains tax break creates instability in the tax code.

“I think it’s important that we have some consistency and that we honor the commitment we made two years ago,” Shepherd said.

A top Senate leader, meanwhile, left open the possibility of the Legislature considering a tax break for military veterans, despite concerns that there’s no money in the state’s budget for any more tax cuts in the coming fiscal year.

Senate Revenue and Taxation Committee Chairman Sen. Jake Files on Wednesday said he’d ask Lt. Gov. Tim Griffin to work with lawmakers to see if there’s money for the proposal to exempt veterans’ retirement pay from the state income tax. Griffin and veterans’ advocates urged the panel to advance the proposal, saying it would help attract retired service members to the state.

The proposal would phase in the exemption, costing the state an estimated $4.8 million in the coming fiscal year and $13 million a year when fully implemented in 2018.

“I think there’s a will to do this, but the roadblock is how to make this happen,” Files, a Republican from Fort Smith, told reporters.

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Associated Press writer Andrew DeMillo in Little Rock contributed to this report.

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Follow Allen Reed on Twitter at https://twitter.com/Allen_Reed

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