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LITTLE ROCK — LITTLE ROCK — Arkansas lawmakers moved Thursday to restore a 2013 capital gains tax break that had been scaled back to help pay for a $102 million middle class income tax reduction that Gov. Asa Hutchinson championed.

The House Revenue and Taxation Committee endorsed a proposal to raise the percentage of a capital gain that is exempt from the state income tax. The proposal now heads to the full House, where more than half the members have signed on as co-sponsors.

The move, which would cost the state $6 million in the coming fiscal year and $11 million the following year, comes as lawmakers are finalizing the state's budget and head into the final days of the legislative session.

The chairman of the tax panel said he believed the exemption could be paid for through normal revenue growth.

"This thing had overwhelming support in the House and the Senate, and this is what a lot of members in the House and Senate wanted," Democratic Rep. Joe Jett of Success told reporters after the vote.

The Legislature in 2013 raised the portion of a capital gain exempt from income tax from 30 percent to 50 percent. But that exemption was scaled back to 40 percent to help pay for Hutchinson's tax cut proposal, which the Republican governor signed into law last month.

The proposal advanced Thursday raises the exemption to 45 percent this year and back to 50 percent on July 1, 2016. It also restores an exemption for capital gains of more than $10 million.

Jett said his committee was holding off on considering other tax cut proposals as legislative leaders craft the bill detailing the state's $5.2 billion budget for the coming year. Other tax breaks that have been proposed include exemptions benefiting veterans and farmers.

Hutchinson on Thursday said he was already looking at how to adjust his budget proposal to pay for restoring the break. Hutchinson's budget calls for boosting funding for schools, prisons and Medicaid, with a 1 percent cut to most other state agencies and flat funding for higher education.

Senate President Jonathan Dismang said he believed his chamber would approve restoring the exemption, but cautioned against additional tax cuts.

"Things are very tight at this point," Dismang, a Republican from Beebe, told reporters.

The only member of the panel to vote against the tax break questioned the need for restoring the break while the budget bill was being finalized.

"I just think this is premature and I think it doesn't reflect the priorities that address all of our constituents, especially those who are in the greatest need and who are the hardest working," said Democratic Rep. Vivian Flowers of Pine Bluff.

Read Friday's Arkansas Democrat-Gazette for full details.

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