The wealthiest Arkansans might be bringing home a little more tax-free money thanks to Representative Shepherd’s bill (HB1402) that would reinstate the 2013 capital gains tax cuts benefiting mostly wealthy and upper-income taxpayers.

Earlier this session, Governor Hutchinson’s Middle Class Tax Relief Act scaled back some of the 2013 tax cuts to capital gains income, or money made from selling stocks or real estate. This was a great move for tax fairness in Arkansas because tax cuts to capital gains generally only benefit wealthy people.  The new bill would undo that progress and restore a 50 percent break on capital gains income (the Governor’s plan reduced the break to only a 40 percent exemption on capital gains income) as well as a shameful exemption on all capital gains income over $10 million. When kids have unmet needs because of lack of funding to pre-K centers and child welfare programs, it is hard to imagine someone who deserves a tax break less than those who already make more than $10 million a year.

Putting the capital gains tax cuts back in place would make an already unfair tax system worse. A 50 percent capital gains tax cut saves someone in the top one percent of Arkansas earners about $4,200 a year. That same tax cut saves the typical middle-income Arkansan only about $2 a year. In Arkansas, the more you make, the less you pay in state and local taxes as a share of your income. The top 1 percent of taxpayers (those making over $330,000 a year) have the lowest state and local tax burden of any income group; they pay less than six percent in taxes as a percent of their income. The lowest 20 percent of taxpayers (people making less than $16,000 a year) pay 12 cents on every dollar, or twice the rate as their wealthy neighbors. Research shows that tax breaks like this don’t attract businesses to the state or help create jobs, they are nothing more than yet another tax break for the extremely wealthy.

This bill would also cause problems with the budget. Scaling back the capital gains tax exemption was an important part of the governor’s Middle Class Tax Relief Act because it helped pay for the tax cuts to the middle class. Because Arkansas law requires a balanced budget, we will have to make up the difference by slashing program budgets or increasing other taxes.  This bill will cost state general revenue $10.7 million in 2016 and $14.3 million in 2017.There is simply no room to give a slice of our budget to millionaires when we are already underfunding an array of programs that are important to children and families: the state’s ABC pre-K program, community-based rehabilitation programs for juvenile offenders, child welfare case workers and investigators, poverty funding for low-income students, higher education, and improvements to infrastructure like highways and roads.