Hickey defends city’s tax exemption
Arkansas state Sen. Jimmy Hickey, R-Texarkana, vows to continue forward to protect the Texarkana state income-tax exemption after a recent committee meeting in Little Rock.
“It would be devastating if the exemption was removed since the exemption was established 39 years ago,” Hickey told the Texarkana Gazette on Thursday.
Under a law enacted in 1977, residents of Texarkana, Ark., voted to exempt themselves from the state’s income taxes and pay a 1 percent higher sales tax rate than other Arkansans.
The move was made because the neighboring state, Texas, doesn’t have an income tax.
Texarkana’s income tax exemptions reduce state tax collections by about $21 million a year, and Texarkana’s higher sales tax rate raises about $4.5 million a year, according to Joel DiPippa, legal counsel the state Department of Finance Administration.
The exemption has faced numerous legal challenges in its first two decades of existence. In the mid-1990s, the exemption was deemed constitutional by a judge.
Hickey says his cohorts understand the need for the exemption.
“We have some members of the senate and house who fully understand the need for the income tax exemption,” Hickey said this week. “I”m cautiously optimistic we will retain the income tax exemption,” he said.
Earlier Thursday, Hickey criticized
an assistant professor of economics for calling on lawmakers to consider repealing Texarkana’s state income-tax exemption. The committee is considering eliminating tax exemptions as part of a tax overhaul, according to a news report in the Arkansas DemocratGazette.
The 16-member Tax Reform and Relief Task Force was created under Acts 78 and 79 during this year’s regular session. In that same session, the Legislature approved Republican Gov. Asa Hutchinson’s plan to cut individual income taxes for Arkansans with less than $21,000 a year in taxable income. This plan is projected to reduce state general revenue by about $25 million when it takes effect in mid-fiscal 2019 and then by $50 million each year thereafter.
An earlier income tax cut, approved in 2015, reduces the rates for taxable income between $21,000 and $75,000 a year. That tax cut was expected to reduce general revenue by $100 million a year, starting in fiscal 2017, which ended June 30.
The task force was created in part because some lawmakers favor further income tax cuts, particularly for Arkansans with more than $75,000 in taxable income. Hutchinson has said he wants to continue cutting individual income tax rates.
In the meeting of the Joint Committee on Economic and Tax Policy, Hickey targeted Jeremy Horpedahl, an assistant professor for economics at the University of Central Arkansas, for co-writing an opinion article published July 22 in the Arkansas-Democrat -Gazette in which he wrote that Texarkana’s income-tax exemption “should be at the top of the list” when legislators are considering eliminating exemptions.
The other co-author was Nicole Kaeding, an economist for the Tax Foundation.
“It doesn’t matter, but that was extremely insulting to me and I promise you that that was insulting to constituents in our area,” Hickey told Horpedahl.
Hickey said Horpedahl’s opinion piece “was extremely one-sided. … I look at this thing that I don’t want to be offensive to anybody in this state. I don’t care if it’s West Memphis. I don’t care if it’s Texarkana. I don’t care if it’s Malvern. I don’t care if it’s Conway. I feel like that I need to look at the entire picture right there, so I am not trying to tear one city apart.”
Hickey asked whether Horpedahl was approached by any lawmakers or any officials in the state Capitol about the Texarkana income tax exemption before co-writing the opinion.
Horpedahl said he wasn’t.
The problem, Hickey said, is Texas doesn’t have a state income tax while Arkansas has a state income tax.
To compete with Texarkana, the Arkansas side needed an income tax exemption.
Horpedahl said that Arkansas’ tax burden is too high and that’s why Texarkana feels it needs its exemption.
“Our main point in that article actually was to say that we need to get the tax rates lower in Arkansas overall and the first place to start looking is for places with specific exemptions,” Horpedahl said. “If you start taking things off the table before the conversation ever starts, you’re never going to get anywhere and the tax burden for all Arkansans is never going to get down.”
“I will continue forward to keep the income tax exemption,” Hickey said.
(Texarkana Gazette reporter Jim Williamson contributed to this report.)