Advocates back homestead tax credit changes

ROGERS — State lawmakers considered Wednesday proposed legislation to lower property tax bills statewide during the House and Senate committees on City, County and Local Affairs at the Association of Arkansas Counties conference.

If approved next year, the bill would increase the homestead tax credit from $ 350 to $ 400, turn back millions to property owners statewide and create a formula to calculate the homestead credit annually. The credit is funded by a .5 percent sales tax voters approved in 2000 and isn’t meant for other uses, said Mark Whitmore, the association’s chief legal council.

Every homeowner would be affected by the plan, said Washington County Assessor Russell Hill, a Republican running for re-election against Democrat William Chesser in November. The credit was raised to $ 350

from $300 in 2007.

Lawmakers cannot take any action until the legislative session in January but conversations are underway.

Gov. Asa Hutchinson, a Republican running for a second four- year term, said in April he supports an increase to the credit to $375, but the Association of Arkansas Counties and the Arkansas County Assessors’ Association support a higher amount.

On Wednesday, the chief legislative backer of the proposal, Rep. Lanny Fite, R-Benton, said the plan has the backing of the governor.

Hutchinson said previously the account used to reimburse counties for the credit has a surplus of about $79 million. The proposed measure would reduce that by more than $18 million, according to previous estimates, but revenue is expected to continue to increase.

More sales taxes are being collected, property values are rising, and the economy is recovering, Hill said. Committee members noted the fund will show another big increase in revenue soon in light of the June decision by the U.S. Supreme Court allowing sales tax collection on internet sales.

The homestead credit has been used repeatedly by legislators a “slush-fund” to pay for other things, said Chris Villines, executive director of the Association of Arkansas Counties. Association officials recommended adding a formula that would automatically adjust the amount of the homestead credit annually.

That formula would keep $40 million in the account and mean money for the credit is used in line with what voters originally approved, proponents said. But, some lawmakers questioned whether using the surplus to pay for a different tax relief would be better for Arkansas.

Sen. Jim Hen dr en, R-Gravette, said lawmakers should start discussing using the surplus to lower the state’s income or sales taxes. Changing the sales tax’s use would require another vote, Whitmore said.

If approved, the increase isn’t expected to burden assessors, Hill said.

In Washington County, the higher credit might be a boon, Hill said. Justices of the peace have struggled for years over when and whether to raise the county’s millage rate from 3.9. Property owners are unlikely to feel the sting of an increase if the homestead credit is raised, Hill said.

County millage rates can’t be more than 5 mills.

Washington County turned down raising the rate to 4.8 mills last year but has a $5 million deficit between budgeted expenditures and expected revenue this year. Meanwhile, its reserve has dwindled.

“If they were going to raise the millage, this would be the best time to do it.,” Hill said.

NWA Democrat-Gazette/FLIP PUTTHOFF Aliyah Davis, 11, clowns around Wednesday at a photo booth during opening day of the Association of Arkansas Counties conference at the John Q. Hammons Center in Rogers. Officials from counties around the state opened the conference with vendor exhibits and samples, breakfast and breakout meetings for various posts in county government such as county judges, sheriffs and assessors. The conference continues through Friday. Third District Rep. Steve Womack, R-Rogers, addressed the conference Wednesday. Gov. Asa Hutchinson will speak at 9 a.m. today. Aliyah was at the conference with her grandpa, James Ross of Miller County.