Gov­er­nor un­veils high­way plan

Casino, fuel levies in plan for $300M

Arkansas Democrat-Gazette - - FRONT PAGE - MICHAEL R. WICKLINE

Gov. Asa Hutchin­son pro­posed levy­ing a new whole­sale sales tax on gas and diesel fuel, per­ma­nently ex­tend­ing the state’s half-per­cent sales tax for high­ways, and ded­i­cat­ing casino tax rev­enue and other state funds to even­tu­ally raise $300 mil­lion a year for the state Depart­ment of Trans­porta­tion.

Coun­ties and cities also would re­ceive about $114 mil­lion a year for their roads un­der this long-term high­way fund­ing plan.

The new whole­sale sales tax on mo­tor fu­els would in­crease the tax on gas by 3 cents per gal­lon and on diesel by 6 cents per gal­lon. The new tax would be in­dexed, mean­ing it would grow by no more than 0.10 of a cent a year. The tax would re­quire a sim­ple ma­jor­ity vote for ap­proval in the 100-mem­ber House and 35-mem­ber Se­nate, Hutchin­son said.

Two of the largest sources of road fund­ing are taxes on fuel. Arkansas’ ex­cise tax on gaso­line is 21.5 cents per gal­lon (plus the fed­eral ex­cise tax of 18.4 cents per gal­lon). The diesel tax is 22.5 cents per gal­lon (plus a fed­eral tax of 22.4 cents per gal­lon).

“All the in­di­ca­tions are that [tax in­crease] is ab­sorbable and that is rea­son­able for the in­creased needs that we have in terms of high­ways,” the Repub­li­can gov­er­nor said.

“Even with these in­creased user fees, Arkansas mid­dle and low in­come [peo­ple] will have net tax re­duc­tions this year as a re­sult of $150 mil­lion per year tax re­duc­tions that we have al­ready en­acted [in 2015 and 2017] … and then as a re­sult also of the $60 mil­lion re­duc­tion this year that will go into ef­fect on the gro­cery tax [from 1.5 per­cent to 0.125 per­cent],” he said.

The new whole­sale sales tax on gas and diesel would raise about $58 mil­lion a year more for state high­ways, Hutchin­son said. He spoke at a news con­fer­ence with House and Se­nate leg­isla­tive lead­ers and of­fi­cials for the Good Roads Foun­da­tion and Arkansas Truck­ing As­so­ci­a­tion at his side. The tax also would raise $26 mil­lion for cities and coun­ties.

The gov­er­nor also pro­posed ded­i­cat­ing $35 mil­lion at least a year from casino tax rev­enue and re­stricted re­serve funds or other gen­eral rev­enue to­ward high­ways.

The plan also in­cludes in­creas­ing reg­is­tra­tion fees for hy­brid and elec­tric ve­hi­cles to raise about $1.9 mil­lion a year, he said.

Hutchin­son also wants law­mak­ers to re­fer a pro­posed con­sti­tu­tional amend­ment to vot­ers in the 2020 gen­eral elec­tion to per­ma­nently ex­tend the half-cent sales tax for high­ways. That tax was first ap­proved by vot­ers in 2012 and be­gan in 2013 for a 10-year pe­riod. It would raise about $205 mil­lion a year for state high­ways and about $88 mil­lion for cities and coun­ties.

PROS AND CONS

“Every since the leg­isla­tive ses­sion be­gan, ev­ery­body has been ask­ing me what is the gov­er­nor’s plan, what is my plan for a new long-term high­way fund­ing pro­gram for the state,” Hutchin­son said. “The more im­por­tant ques­tion is, is what type of plan we can agree upon to­gether, and that’s what we have been work­ing hard to do over the last few weeks and months.”

The $300 mil­lion plan is the sin­gle largest high­way plan in the state’s his­tory and it would al­low the Depart­ment of Trans­porta­tion to main­tain roads and high­ways and also al­lo­cate ad­di­tional funds for new lane con­struc­tion, he said.

The plan “is the top dol­lar amount that in my judg­ment the peo­ple of Arkansas can af­ford,” Hutchin­son said. “There is a limit on how much we should spend and can spend be­cause wher­ever we set a spend­ing pro­gram some­one has to pay for it.

“What guides me is the worker in a ru­ral part of Arkansas that must drive 30 miles to work and back every day in their ve­hi­cle and put gas in the car. What guides my think­ing is that farmer that has to get his prod­ucts to mar­ket and is driv­ing on a dif­fi­cult road that is not prop­erly main­tained,” Hutchin­son said.

“This plan achieves the right bal­ance. It is af­ford­able. It is pru­dent for our bud­get and it is rea­son­able,” he said.

But the state di­rec­tor for the Amer­i­cans for Pros­per­ity group, Ryan Nor­ris, said, “The gov­er­nor should fo­cus on re­forms that would rein in un­ac­count­able gov­ern­ment spend­ing, such as the turn­back fund­ing ar­range­ment, in­stead of in­creas­ing a tax that will hit the poor­est driv­ers the hard­est.

“It also doesn’t make sense to negate the wel­comed in­come tax re­lief to hard-work­ing tax­pay­ers. Gov. Hutchin­son and leg­is­la­tors de­serve credit for cut­ting taxes but they shouldn’t turn around and take Arkansans’ new-found money every time they put their car in drive,” Nor­ris said in a writ­ten state­ment.

Shan­non New­ton, pres­i­dent of the Arkansas Truck­ing As­so­ci­a­tion, said, “We look for­ward to con­tin­u­ing to in­vest in Arkansas high­ways, so that [truck driv­ers’ ] work­places can be safe, so the roads can be well main­tained for our equipment and so we can be bet­ter, more ef­fi­ciently and re­li­ably de­liver our cus­tomers freight on time.

“We are very proud of this plan and we look for­ward to work­ing with all the lead­er­ship and all the groups that are here to­day in ush­er­ing [the plan] through the Gen­eral Assem­bly,”

Part of Hutchin­son’s plan counts on the state’s gam­bling in­dus­try grow­ing. In Novem­ber, vot­ers ap­proved con­sti­tu­tional Amend­ment 100, which au­tho­rizes four casi­nos in state — two at the race­tracks in Hot Springs and West Mem­phis, which now of­fer elec­tronic games of skill, and two more that would be built in Pope and Jef­fer­son coun­ties. The state Racing Com­mis­sion will be in charge of li­cens­ing and mon­i­tor­ing casi­nos.

Hutchin­son said the state will re­ceive an es­ti­mated $31.2 mil­lion a year in gen­eral rev­enue from the gam­bling in­dus­try. The pro­jec­tion is less than what the state has been col­lect­ing be­cause Amend­ment 100 dropped the tax rate.

“But that does not ac­count for the growth that will hap­pen when the casi­nos are in place and so the ad­di­tional rev­enue that will come in through the casino in­vest­ment will al­low that money to flow to the [Trans­porta­tion Depart­ment],” he said.

“The ad­van­tage of that is that, one, it is go­ing to grad­u­ally in­crease … and sec­ondly, it is a guar­an­teed amount and, in the short years, we will make sure and guar­an­tee that is $35 mil­lion a year. That is a guar­an­tee from our re­stricted re­serve fund, as well as what­ever other sources we need to make sure that that com­mit­ment is made. But that pro­tects the gen­eral rev­enue side be­cause it is a new fund­ing source that we didn’t have be­fore the vot­ers put it in last year,” Hutchin­son said.

Un­der the old tax rate, the state col­lected $64.3 mil­lion in gen­eral rev­enue from Oak­lawn Racing and Gam­ing in Hot Springs and South­land Gam­ing and Racing in West Mem­phis through their elec­tronic games of skills in fis­cal 2018, ac­cord­ing to the state Depart­ment of Fi­nance and Ad­min­is­tra­tion. Fis­cal 2018 ended June 30, 2018.

In Au­gust, fi­nance depart­ment of­fi­cials pro­jected the state would re­ceive $36 mil­lion a year less in gen­eral rev­enue in both fis­cal 2020 and fis­cal 2021 and then $14.5 mil­lion less in fis­cal year 2022 un­der Amend­ment 100.

Hutchin­son said pre­vi­ous es­ti­mates were cal­cu­lated be­fore the an­nounce­ment of ex­pan­sions at Oak­lawn and South­land in­volv­ing hun­dreds of mil­lions of dol­lars.

“So, there is a fresh look at it and there is a com­fort level with this, based upon what we see over the long term as the growth

in casino rev­enue,” he said.

Hutchin­son’s pro­posed longterm high­way fund­ing plan is de­signed not to jeop­ar­dize gen­eral rev­enue that is crit­i­cal for pub­lic schools, col­leges and uni­ver­si­ties, and other state needs such as pub­lic safety, he said. State gov­ern­ment’s two largest sources of gen­eral rev­enue are in­di­vid­ual in­come taxes and sales and use taxes.

Re­fer­ring to Hutchin­son’s plan to cut the state’s top in­di­vid­ual in­come tax rate from 6.9 per­cent to 5.9 per­cent over a two-year pe­riod, Se­nate Pres­i­dent Pro Tem­pore Jim Hen­dren, R-Sul­phur Springs, said, “We re­al­ized that we can’t be com­pet­i­tive in Arkansas with the high­est tax rate of sur­round­ing states.”

“But we also stand here to­day, re­al­iz­ing we can’t be com­pet­i­tive if our high­ways are fall­ing apart, so we have to ad­dress both and I am proud … that we are do­ing that,” Hen­dren said.

House Speaker Matthew Shep­herd, R-El Do­rado, said, “This was a process that took time, even through the week­end, to reach a point that we felt we were com­fort­able that we had a plan that could gar­ner the sup­port that we needed on both ends of the Capi­tol.

“For me, with re­gard to the idea of po­ten­tially re­fer­ring out the half-cent sales tax … I thought it was im­por­tant to show the peo­ple of Arkansas that we have tried to do some things dif­fer­ently, so I ap­pre­ci­ate the gov­er­nor’s will­ing­ness to work with me and oth­ers with re­gard to the $35 mil­lion that pro­vides us a good base of sup­port from the funds that we al­ready have avail­able and then with the gam­ing rev­enue, the pos­si­bil­ity of grow­ing that amount over time is very at­trac­tive,” he said.

TAX CUT PLAN

Shep­herd said the pre­sen­ta­tion of the gov­er­nor’s high­way fund­ing plan will hope­fully help some rep­re­sen­ta­tives em­brace Hutchin­son’s pro­posed in­come tax cut.

“I think this will al­low us to pick up a few more votes on the tax cut pro­posal,” the speaker said.

Shep­herd said the gov­er­nor’s in­come tax leg­is­la­tion will be con­sid­ered in the House Rev­enue and Tax­a­tion Com­mit­tee this morn­ing and he ex­pects the House to con­sider the bill later this week.

“We got to get our tax bill passed,” Hutchin­son said. “I want that passed and ad­dressed this week.”

Hutchin­son’s tax cut leg­is­la­tion is Se­nate Bill 211 by Sen. Jonathan Dis­mang, R-Searcy.

State of­fi­cials project it would re­duce rev­enue by $97 mil­lion a year af­ter it is fully im­ple­mented. The bill re­quires a three-fourths vote for ap­proval be­cause it would in­crease in­come

tax rates on some tax­pay­ers, but no tax­pay­ers would be hit with a tax in­crease, ac­cord­ing to state of­fi­cials.

The House in­cludes 76 Repub­li­cans and 24 Democrats.

Be­fore the gov­er­nor’s an­nounce­ment Mon­day, House Democrats held a news con­fer­ence to pro­mote leg­is­la­tion to cre­ate a tax credit for low-in­come and mid­dle-in­come tax­pay­ers.

Rep. Tippi McCul­lough, D-Lit­tle Rock, on Fri­day in­tro­duced House Bill 1418 to cre­ate a state earned in­come tax credit that would be equal to 10 per­cent of the fed­eral earned in­come tax credit. She said the credit would pro­vide tax re­lief to more than 300,000 work­ing fam­i­lies.

House Demo­cratic leader Charles Blake, D-Lit­tle Rock, said HB1418 would re­duce rev­enue by $78 mil­lion a year and he hopes the bill is pre­sented to the House tax com­mit­tee to­day.

But House Rev­enue and Tax­a­tion Com­mit­tee Chair­man Joe Jett, R-Suc­cess, said he doesn’t ex­pect the com­mit­tee to con­sider McCul­lough’s leg­is­la­tion to­day be­cause the fi­nance depart­ment hasn’t pro­vided a fis­cal im­pact state­ment on it yet. He said he plans to let McCul­lough present the bill to the com­mit­tee as soon as pos­si­ble af­ter the state­ment is com­pleted.

Blake said he also ex­pects leg­is­la­tion to be in­tro­duced soon to cre­ate a state earned in­come tax credit that would re­duce rev­enue and limit Hutchin­son’s pro­posed tax cut to those with less than $456,000 a year in tax­able in­come. The re­duced rev­enue would be about $103 mil­lion a year — about $78 mil­lion for cre­at­ing the earned in­come tax credit and about $25 mil­lion by lim­it­ing Hutchin­son’s pro­posed tax cut for those with less than $456,000 a year in tax­able in­come — un­der his plan, he said.

Dur­ing a meet­ing of the Leg­isla­tive Black Cau­cus, Hutchin­son’s high­way fund­ing plan drew some crit­i­cism from sev­eral Democrats.

Sen. Linda Ch­ester­field, D-Lit­tle Rock, said, “We just cut taxes on the wealthy” with the Se­nate’s ap­proval of Hutchin­son’s in­come tax plan on Wed­nes­day.

“One of my main con­cerns in the Se­nate was, that you’re go­ing to raise taxes on the lit­tle guy,” she said. “You’re talk­ing about a three cents tax on gas or a six cents tax on diesel, that’s the lit­tle guy. So in or­der to bal­ance the bud­get or to get high­way fund­ing, you’re go­ing to have to call on the lit­tle guy to up some more money one way or an­other. That’s what’s trou­bling to me about the whole thing,” she said.

Rep. Megan God­frey, D-Spring­dale, said in an in­ter­view, “There’s a lot about the plan that we like.

“I’m glad the gov­er­nor is mak­ing an in­vest­ment in in­fra­struc­ture, and I think it has a good bal­ance,” she said.

“We do want to en­sure that it does what it says it does,” leav­ing any ser­vices that de­pend on gen­eral rev­enue un­harmed, God­frey added.

In­for­ma­tion for this ar­ti­cle was con­trib­uted by Hunter Field and John Moritz of the Arkansas Demo­crat-Gazette.

Arkansas Demo­crat-Gazette/STATON BREIDENTHAL

Gov. Asa Hutchin­son lis­tens Mon­day dur­ing a news con­fer­ence at the state Capi­tol where he un­veiled his high­way plan. Leg­isla­tive lead­ers were com­ment­ing about the pro­posal that would per­ma­nently ex­tend a half-per­cent sales tax, in­crease fuel taxes and tap casino rev­enue.

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