Next week, pan­els to take up tax cuts

Bills on mil­i­tary ben­e­fits also filed

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

The state House and Se­nate tax com­mit­tees will con­sider bills next week for Gov. Asa Hutchin­son’s pro­posed $50 mil­lion-a-year tax-rate re­duc­tions for Arkansans with less than $21,000 a year in tax­able in­come, leg­isla­tive lead­ers said Thurs­day, a day af­ter the leg­is­la­tion was filed.

Other leg­is­la­tion was in­tro­duced Thurs­day to en­act the Repub­li­can gov­er­nor’s $ 19 mil­lion- a-year plan to ex­empt mil­i­tary re­tire­ment ben­e­fits from state in­come taxes and cut the state’s soft­drink syrup tax in ex­change for mod­i­fy­ing three tax ex­emp­tions. The ex­emp­tion of mil­i­tary re­tire­ment ben­e­fits from in­come taxes is pro­jected by the state to re­duce general rev­enue by $13 mil­lion a year.

Thurs­day was the fourth day of the 91st General As­sem­bly’s reg­u­lar ses­sion. The House and Se­nate will be in re­cess un­til Tues­day. Mon­day is the state hol­i­day rec­og­niz­ing the birthdays of Martin Luther King Jr. and Con­fed­er­ate Gen. Robert E. Lee.

“I would like to see the tax plans move for­ward. I think the Se­nate com­mit­tee

is go­ing to be tak­ing them up quickly,” Hutchin­son told re­porters.

Se­nate Repub­li­can leader Jim Hen­dren of Sul­phur Springs said he’s go­ing to try to run his Se­nate Bill 115, which would en­act the larger in­come tax cut, in the Se­nate Rev­enue and Tax­a­tion Com­mit­tee on Wed­nes­day.

“I have got sev­eral co-spon­sors. I’m get­ting very lit­tle re­sis­tance to the in­come tax plan,” said Hen­dren, whose un­cle is Hutchin­son.

SB115 also would cre­ate an Arkansas Tax Re­form and Re­lief Task Force with 16 mem­bers who would rec­om­mend a com­pre­hen­sive plan to re­duce rates. The task force would be re­quired to file a fi­nal writ­ten re­port with the gov­er­nor, House speaker and Se­nate pres­i­dent pro tem­pore on or be­fore Sept. 1, 2018, in ad­vance of the 2019 reg­u­lar ses­sion.

Some law­mak­ers have been re­luc­tant to com­mit to the pro­posed tax cut be­cause sales and use tax col­lec­tions lag be­hind the fore­cast for fis­cal 2017, which started July 1. The 2015 Leg­is­la­ture en­acted the gov­er­nor’s in­di­vid­ual in­come tax cuts for Arkansans who make $21,000 to $75,000; those cuts are pro­jected to re­duce general rev­enue by about $100 mil­lion this fis­cal year.

State of­fi­cials project that the pro­posed $50 mil­lion-ayear in­come tax cut would re­duce general rev­enue by $25 mil­lion when it takes ef­fect in mid-fis­cal 2019, which starts July 1, 2018, and $50 mil­lion a year there­after.

John Shel­nutt, the state’s chief eco­nomic fore­caster, told the Se­nate tax com­mit­tee Wed­nes­day that he ex­pects sales and use tax col­lec­tions to im­prove dur­ing the fi­nal six months of fis­cal 2017.

Richard Wil­son, as­sis­tant di­rec­tor of re­search for the Bureau of Leg­isla­tive Re­search, told the House tax com­mit­tee Thurs­day that he ex­pects rev­enue col­lec­tions to fully fund the state’s $5.33 bil­lion bud­get in fis­cal 2017 and “per­haps a small sur­plus, [but] noth­ing like last year at $177 mil­lion.” He cau­tioned it’s pos­si­ble that in­creased in­come tax re­funds this spring could de­rail his pro­jec­tion.

House Rev­enue and Tax­a­tion Com­mit­tee Chair­man Joe Jett, R-Suc­cess, said he ex­pects that the com­mit­tee next Thurs­day will con­sider House Bill 1159 — spon­sored by House Repub­li­can leader Mat Pitsch of Fort Smith. The bill is iden­ti­cal to Hen­dren’s SB115.

“I am still kind of hedg­ing my bets here a lit­tle bit,” Jett said when asked whether he sup­ports HB1159.

“But now, if the gov­er­nor can prove to us we have got the money there to do it, then I’m go­ing to vote yes on the $50 mil­lion for the low-in­come [tax cut],” he told re­porters.

Dur­ing the House tax com­mit­tee’s meet­ing, Jett told fel­low mem­bers, “Ba­si­cally, I think what’s go­ing to take place is we do the gov­er­nor’s tax cut pack­age and then we work through those is­sues.”

He said the House tax com­mit­tee will de­lay ac­tion on other tax-cut bills un­til the end of the ses­sion, and the com­mit­tee will con­sider the bills based on the bud­get for fis­cal 2018 and pro­jected rev­enue col­lec­tions.

“The most im­por­tant thing in this com­mit­tee is ev­ery­body has a fair and hon­est hear­ing, if you will, for open de­bate, but

we also have to rec­og­nize the fact that we are the first line of de­fense to pro­tect the bud­get for the state of Arkansas, and that’s where I need you guys to help to do that,” Jett told the House tax com­mit­tee.

Af­ter the House com­mit­tee meet­ing, Rep. War­wick Sabin, D-Lit­tle Rock, said that on Thurs­day he filed House Bill 1161, which would cre­ate an earned in­come tax credit for low-in­come Arkansans. The Se­nate Rev­enue and Tax­a­tion Com­mit­tee chair­man, Sen. Jake Files, R-Fort Smith, is a co-spon­sor of the bill, and Jett said he agreed to co-spon­sor it. Files said he filed an iden­ti­cal bill, Se­nate Bill 119, to get a pro­jected rev­enue im­pact from the state De­part­ment of Fi­nance and Ad­min­is­tra­tion.

“I did hear what Rep. Jett said, but in the con­text of con­sid­er­ing the gov­er­nor’s tax cut, I think the Work­ing Fam­i­lies Op­por­tu­nity Act de­serves the same con­sid­er­a­tion,” Sabin said, re­fer­ring to his bill. “I think that every­one un­der­stands that there is a process that in­volves 135 leg­is­la­tors and all good ideas de­serve a pub­lic hear­ing.”

Jett said he ad­vised Sabin to try to work out this is­sue with Hutchin­son, adding that Sabin still could present his bill to the com­mit­tee late in the ses­sion.

“We have our $50 mil­lion tax cut for low in­come that is sim­ply a re­duc­tion of the rates, and I did not go with the earned in­come tax [credit] model,” Hutchin­son said. “I just want to have sim­ply a tax re­duc­tion and a re­duc­tion of the rates.”

Sen. Jane Eng­lish, R-North Lit­tle Rock, and Rep. Char­lene Fite, R-Van Buren, on Thurs­day filed iden­ti­cal bills to en­act Hutchin­son’s plan to ex­empt mil­i­tary re­tire­ment ben­e­fits from in­come taxes. They are Se­nate Bill 120 and House Bill 1162, re­spec­tively.

The first $6,000 a year in mil­i­tary re­tire­ment ben­e­fits is ex­empt un­der cur­rent law.

Ex­empt­ing mil­i­tary re­tire­ment pen­sions and re­duc­ing the soft-drink syrup tax from $2 per gal­lon to $1.26 per gal­lon would re­duce rev­enue by a pro­jected $19.3 mil­lion a year. To com­pen­sate, SB120 and HB1162 would levy a 6.5 per­cent sales tax on candy and soft drinks, now taxed at the 1.5 per­cent rate on gro­ceries; re­move the ex­clu­sion of unem­ploy­ment com­pen­sa­tion from in­come taxes, to mir­ror fed­eral law; and ap­ply the sales tax on the full cost of man­u­fac­tured hous­ing, now taxed at 62 per­cent of the struc­ture’s value.

Eng­lish and Fite said they don’t know when they’ll present their bills to the Se­nate and House tax com­mit­tees.

Files said a lot of peo­ple ob­ject to in­creas­ing the sales tax on man­u­fac­tured hous­ing, which is pro­jected to raise $2.4 mil­lion a year.

“Hope­fully, we are look­ing at some al­ter­na­tives on that and that’s a lit­tle bit in flux. I think there is bet­ter than a 50-50 chance that there may be some changes to that part of it,” he said.

“I think a lot of the mem­bers would like to vote for [ex­empt­ing mil­i­tary re­tire­ment ben­e­fits from taxes], but the way it be­ing paid for is caus­ing some mem­bers heart­burn and pause, and I am kind of in that group,” Jett said, re­fer­ring to ap­ply­ing the sales tax to the full cost of man­u­fac­tured hous­ing.

Hutchin­son said he’s “open to any al­ter­na­tives.”

“We have to pay for that por­tion of the tax cut for our mil­i­tary re­tirees, so we out­lined what [are] the off­sets that are needed to pro­tect the bud­get,” he said. “If there is a bet­ter ex­emp­tion that some­body else wants to close, we are open to dis­cus­sion on it.”

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