- Associated Press - Tuesday, December 13, 2016

LITTLE ROCK, Ark. (AP) - Gov. Asa Hutchinson on Tuesday proposed cutting income taxes for 657,000 low-income Arkansas residents as he also called for a $13 million break for military veterans that he said could be paid for by raising taxes on unemployment compensation, manufactured housing, candy and soft drinks.

The Republican governor detailed his tax cut proposal less than a month before the Legislature convenes for the 2017 session, setting the stage for a fight with some within his party who are pushing for deeper reductions that will take place sooner. Hutchinson’s income tax cut proposal would take effect in the fiscal year that begins July 2018, and would cut taxes for those making less than $21,000 a year.

“We want to have tax policy that is growth-oriented,” Hutchinson said at a news conference at the state Capitol.

Under Hutchinson’s proposal, about 120,000 taxpayers making less than $4,300 a year would pay no income taxes. Those making between $4,300 and $20,999 a year would see their tax rate reduced by .4 percent. Lawmakers last year approved Hutchinson’s $102 million tax cut plan for those making between $21,000 and $75,000 a year. The first-term governor was elected in 2014 on a promise to cut income taxes across the board.

Hutchinson also called for exempting military veterans’ retirement benefits from the state income tax, a move that would cost the state $13 million a year.

“I believe it will help us to bring more military retirees here, welcome them back to Arkansas,” Hutchinson said.

Hutchinson said the veterans’ tax break would be offset by repealing exemptions elsewhere. The bulk of it would come from levying the full sales tax on candy and soft drinks, a move that would raise $13.8 million a year. Along with the candy and soft drink increase, Hutchinson backed reducing the tax that restaurants and retailers pay on syrup for soft drinks by $6.3 million. He also proposed removing the state income tax exemption on unemployment benefits and applying the sales tax on the full cost of manufactured housing, which combined would raise $5.5 million a year.

The governor’s plan is likely to face resistance from some fellow Republicans in the Legislature who have called for deeper cuts. One lawmaker has called for cutting income taxes by $105 million, and has suggested taxing medical marijuana sales could be used to offset the revenue loss. Arkansas voters last month approved legalizing medical marijuana, but it could be several months or longer before drug sales begin.

Republican Rep. Charlie Collins, who sits on the House panel that will take up the tax cut plan, said he was disappointed in the governor’s plan. Collins said the reduction should be across the board, not just targeting one income bracket or one group.

“It’s just not fair and it’s bad policy in addition to not being fair,” Collins said.

It’ll also face pushback from Democrats, who have expressed concern about cuts coming at the expense of other state needs. Democratic Rep. Warwick Sabin, who also sits on the House tax panel, said he’ll again push for a tax credit for low-income residents.

“We need to do more to help bring people out of poverty and use tax policy to build the economy here in Arkansas,” Sabin said.

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Follow Andrew DeMillo on Twitter at www.twitter.com/ademillo .


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