Arkansas Democrat-Gazette

Panel looks at parts of tax code to review

- MICHAEL R. WICKLINE

The Legislatur­e’s tax overhaul task force on Thursday turned its attention to identifyin­g what parts of the state’s individual and corporate income-tax code its members want to review for possible changes.

Members of the 16-member Tax Reform and Relief Legislativ­e Task Force submitted their individual lists of provisions of these income-tax codes that they want more informatio­n on. The task force will decide during its next meeting May 23-24 which of these changes to study further.

A two-page compilatio­n of the lists of tax study proposals includes cutting the top individual income-tax rate from 6.9 percent to 5.9 percent or 5 percent; cutting the top corporate rate of 6.5 percent to 5.9 percent; and creating an earned income tax credit.

Other study proposals include simplifyin­g individual and corporate tax brackets; reviewing deductions; and the use of triggers to cut taxes in the Revenue Stabilizat­ion Act, which distribute­s general tax revenue to state programs.

The members also proposed studying an increase from five years to 20 years the period in which net operating losses can be carried forward by businesses for tax purposes, to use against future income earned, and reviewing the income-tax exemption for net capital gains in excess of $10 million.

“The fact that this is on this list means nothing more than we are going to get more

informatio­n about it in our followup meeting,” a task force co-chairman, Sen. Jim Hendren, R-Sulphur Springs, told the task force. “It does not mean it is a recommenda­tion. It does not mean it is anything other than we want to get more informatio­n and we are trying to whittle the list down.”

The task force is required under state law to make recommenda­tions to Gov. Asa Hutchinson and the General Assembly by Sept. 1 in advance of the 2019 regular session that starts in January.

The panel was created under a 2017 state law in part to placate some lawmakers who favor larger individual income-tax rate cuts, particular­ly for those with more than $75,000 a year in taxable income.

In February, Hutchinson told lawmakers he wants them in 2019 to cut the state’s top individual income-tax rate from 6.9 percent to 6 percent and he projects the cut would reduce revenue by about $180 million a year.

In 2015 and 2017, the Leg- islature has enacted the Republican governor’s plans to cut individual rates for people with up to $75,000 a year in taxable income. Those plans are collective­ly projected to cut revenue by about $150 million a year.

Last week, Hutchinson made clear in a letter to the task force that he opposes raising the sales tax on groceries. The letter came about a week after the task force narrowly voted to study the option of raising the tax on groceries and, to offset the increased sales tax, creating either a refundable earned income-tax credit for those who work or a refundable income-tax credit for low- to moderate-income people.

The tax on groceries is now 1.5 percent and scheduled to drop to 0.125 percent, effective Jan. 1, under a 2013 state law that contemplat­es using savings from the state no longer having to make desegregat­ion payments to three Pulaski County school districts.

Between 2007 and 2011, the Legislatur­e enacted Democratic Gov. Mike Beebe’s plans to gradually cut the grocery tax from 6 percent to 1.5 percent. The state Department of Finance and Administra­tion has estimated that the 1.5 percent grocery rate reduced revenue by $248.9 million in fiscal 2017, including $190.6 million in general revenue.

During its meeting Thursday morning, the task force didn’t discuss whether to proceed with its study of the grocery tax.

Asked whether the task force will continue with its review of this option, another task force co-chairman, Rep. Lane Jean, R-Magnolia, told reporters, “I am going to talk with the members of the task force and, if we have a will to study it further, we’ll study it further. If we are not going to proceed on something that we don’t have the will out of the 16 [to continue] … ” Jean said. “I have not talked to everybody, and not everybody is here today.”

Last month, the task force also voted to proceed with closer studies of sales-tax exemptions for the back-toschool tax holiday for school supplies, clothing and clothing accessorie­s; services provided by coin-operated carwashes; sales of four-wheelers and all-terrain vehicles for farm use; those for named nonprofit entities; and any exemption of less than $10,000.

Hendren, the nephew of the governor, told lawmakers Thursday that “if you made a recommenda­tion on a specific exemption, you need to be prepared in June to say, ‘Here’s the informatio­n that I gathered through [the Bureau of Legislativ­e Research] and from the stakeholde­rs that are involved in this, [and] because of this, I propose that the task force recommend X, Y or leave it the same.’ ”

The task force is required under state law to make recommenda­tions to Gov. Asa Hutchinson and the General Assembly by Sept. 1 in advance of the 2019 regular session that starts in January.

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