Panel: Compare tax revenue, costs

The Legislature’s tax overhaul task force signaled Wednesday that it wants its consultant to compare specific types of tax revenue to related costs, such as gastax revenue to the cost of the roads for which they are intended to pay.

Other comparisons would be tobacco-tax revenue to related health care costs and alcohol-tax revenue to costs tied to use of those beverages.A couple of the task force members made these requests of its consultant, PFM director Randall Bauer of Des Moines, Iowa, as he detailed various excise taxes that he said totaled $1.3 billion in fiscal 2016, which ended June 30, 2016. The excise taxes accounted for 13.5 percent of total tax collections.

At the urging of Rep. Mat Pitsch, R-Fort Smith, Bauer also agreed to add Iowa to the list of seven other states that Bauer uses as benchmarks for comparisons with Arkansas’ taxes. The other states are neighbors — Louisiana, Mississippi, Missouri, Oklahoma, Tennessee and Texas — as well as Kansas.

“We look an awful lot like Iowa,” Pitsch said.

The Legislature created the 16-member task force under laws enacted during this year’s regular session in part to placate some lawmakers who favor larger income tax cuts than the Legislature has enacted during the 2015 and 2017 sessions.

“As we start assessing excise taxes, the information I would like to know, are the taxes for the roads anywhere close to meeting the cost?” said a task force co-chairman, Sen. Jim Hendren, R-Sulphur Springs, at its meeting Wednesday morning. “Are the taxes on alcohol and cigarettes anywhere close to meeting the state’s costs associated with those activities?”

Asked afterward about his request for information comparing gas taxes to road costs, Hendren said, “We are not a highway task force and I am not interested in finding new revenue streams to fund new government, whether it is highways or whether it will be additional funding for higher ed or pre-K.

“We are not talking about the spending side of this. We are talking about the tax code, so what I want to look at it in relation to the tax code is, do we have the appropriate amount of our revenue stream coming from the appropriate sources? Do we need to lighten the burden here, put more of our effort here? … It is about making sure the dollars follow the demands,” he said.

Last month, the state Highway Commission decided to return to the drawing board to develop measures to raise more money after Republican

Gov. Asa Hutchinson vowed to “vigorously oppose” any effort to siphon general tax revenue for road construction.

At that time, state Transportation Director Scott Bennett said commission members hadn’t ruled out developing a proposed measure to qualify for the 2018 general election ballot, but they’ll also consider going to the Legislature in 2019. The commission wants $400 million more a year to maintain the existing state highway system and provide some construction to ease congestion.

Motor fuel-tax revenue has averaged $441 million a year between fiscal years 2012 and 2016 and totaled $459 million in fiscal 2016, Bauer said. The state’s tax is 21.5 cents per gallon of gasoline and 22.5 cents per gallon of diesel fuel and ranks behind only Kansas among the seven states used in the comparison, he said.

He said 24 states have increased fuel taxes since 2013 in response to aging roads and bridges; reduced federal funding; and the erosion of the fuel tax base because of factors such as improved vehicle mileage.

Arkansas’ motor fuel-tax rate has remained unchanged since 2001, he said. In 2012, Arkansas voters approved a half-percentage point salestax increase to fund highway work.

Cigarette-tax revenue has averaged $175 million a year between fiscal years 2012 and 2016 and totaled $171 million in fiscal 2016, Bauer said. The cigarette-tax rate is $1.15 per pack of 20 cigarettes and ranks behind only Kansas and Texas among the seven states, but is far above Missouri’s rate of 17 cents per pack, he said.

Thirty-seven states have increased cigarette taxes since 2007 and the median

value of the increases has been 47 cents per pack of 20 cigarettes. Arkansas last raised its rate by 56 cents in 2009, Bauer said.

Hendren said his district is near the border with Missouri, which has the lowest cigarette tax in the nation and has lower alcohol taxes than Arkansas.

“We are left with a situation where we know we’re going to have an Arkansas-Missouri challenge and … and we need to see what the magnitude of that problem is and what the options are far as solving it,” Hendren said.

Bauer said cigar and tobacco tax collections beyond cigarettes have averaged $50 million a year between fiscal 2012 and 2016 and totaled $51 million in fiscal 2016. The tax rate is 68 percent of the manufacturer’s selling price, he said.

Alcohol-tax collections have averaged $29 million a year between fiscal 2012 and fiscal 2016 and totaled $30 million in fiscal 2016, Bauer said.

The beer tax of 23 cents per gallon is behind Tennessee, Mississippi and Oklahoma among the seven states, while the liquor tax of $2.50 per gallon lags Oklahoma, Tennessee and Louisiana among the seven states. Mississippi’s mark-up puts it above Arkansas for a bourbon-to-bourbon comparison, he said.

The wine tax of 75 cents per gallon is lower than Louisiana and Tennessee among these seven states, he said.

Rep. Kim Hammer, R-Benton, said he wants a comparison of the state’s alcohol-tax revenue and the cost of rehabilitation and other health-rated matters linked to alcohol because “people are frying their brain with alcohol.”