- Associated Press - Thursday, March 26, 2015

LITTLE ROCK, Ark. (AP) - Arkansas Gov. Asa Hutchinson said Thursday that there’s no room in his proposed budget for additional tax cuts, despite a renewed push to find funding for a tax exemption for military veterans.

Hutchinson told reporters that a $102 million middle class income tax cut he signed into law last month and an effort to restore a capital gains tax break that was scaled back to help pay for that reduction are all that his proposed budget can afford.

“That’s as much as we can do under this budget,” Hutchinson said at a news conference at the state Capitol.

The chairman of the Senate Revenue and Taxation Committee on Wednesday left open the possibility of an income tax exemption on veteran’s retirement pay, and asked the lieutenant governor to work with lawmakers on finding a way to fund it. 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.

Hutchinson said the focus as he and lawmakers finalize the proposed $5.2 billion budget for the coming fiscal year has been finding money to restore the capital gains tax break. The legislation approved by the House this week would cost the state $6 million in the coming year and $11 million the following year. The measure is pending before a Senate committee.

Democrats, who unsuccessfully pushed for a tax credit for low-income Arkansans, have said the capital gains break would disproportionately benefit higher-income Arkansans and complained the Legislature. The legislation would gradually raise the income tax exemption on capital gains from 40 percent to 50 percent. It also would restore an exemption for capital gains of more than $10 million.

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