January 25, 2017

Gov. Hutchinson’s low-income tax plan: A good start, but needs work

ITEP Work in Action

Governor Asa Hutchinson’s new tax cut proposal includes a break, at long last, for some of the lowest income working families in our state. The bones of this plan are good – it isn’t too expensive, and it includes a portion of the families making less than $21,000 a year who were left out of the last two rounds of tax cuts. However, the plan has some significant flaws. Some people at almost every income level, even the very rich, can use the low-income bracket changes because of how income is measured in the plan. This waters down the benefits to actual low-income workers, who were the original intended recipients. It is nonetheless a positive starting point, and the flaws that allow upper income taxpayers to benefit from low-income brackets can be cleaned up by switching to a tax credit approach. A tax credit strategy would keep the basics of this plan (its low cost and inclusion of low-income taxpayers) but would be more streamlined, efficient, and would put more dollars into the pockets of people on their way to the middle class.

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