Roads, in­come taxes on agenda for week

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

Leg­is­la­tion that would im­ple­ment Gov. Asa Hutchin­son’s lat­est pro­posed in­come tax cut will be con­sid­ered by the House Rev­enue and Tax­a­tion Com­mit­tee on Tues­day, com­mit­tee chair­man Rep. Joe Jett, R-Suc­cess, said.

But the day be­fore, at 11 a.m. Mon­day, Hutchin­son will hold a news con­fer­ence to dis­cuss de­tails of a long-awaited, long-term high­way plan. The an­nounce­ment will be made in the gov­er­nor’s con­fer­ence room at the state Capi­tol, his of­fice said Fri­day.

This week is also the dead­line for fil­ing pro­posed con­sti­tu­tional amend­ments. And the spon­sor of the gov­er­nor’s re­or­ga­ni­za­tion plan says he’ll file a com­plete bill in about a week.

Jett said he hopes the emer­gence of the high­way fund­ing pro­posal will help per­suade some re­luc­tant law­mak­ers to vote for the tax plan on the House floor this week. Some rep­re­sen­ta­tives have been hes­i­tant to em­brace the tax cut in the ab­sence of a plan to raise more money for high­way con­struc­tion and main­te­nance.

State of­fi­cials project that Hutchin­son’s tax cut plan will re­duce state rev­enue by about $97 mil­lion a year, af­ter it’s fully im­ple­mented. Some have ques­tioned why the Leg­is­la­ture would cut taxes and then turn around and raise other taxes.

Jett said he ex­pects the in­come tax leg­is­la­tion — Se­nate Bill 211 by Sen. Jonathan Dis­mang, R-Searcy — to move through his com­mit­tee in “good shape.”

Jett is the House spon­sor for the bill.

“If we can get the high­way plan nailed down this week­end, this will go a long way to free up the few re­main­ing votes we need to have,” he said.

SB211 needs 75 votes in the 100-mem­ber House (three-

fourths) to pass. It would in­crease rates on about 213,000 tax­pay­ers in the up­per-in­come tax ta­ble. How­ever, state of­fi­cials said those tax­pay­ers won’t pay over­all higher taxes un­der what Hutchin­son calls his “5.9 plan.”

The plan would re­duce the high­est tax rate — now 6.9 per­cent — to 5.9 per­cent.

The House con­sists of 76 Repub­li­cans and 24 Democrats.

But as far as a high­way-fund­ing plan, House Speaker Matthew Shep­herd, R-El Do­rado, said Fri­day af­ter­noon that “there is no deal yet.

“I’m still op­ti­mistic. We’re con­tin­u­ing to work,” he said. “We’ll try to con­tinue to work through the week­end to find con­sen­sus. There is not a plan that I’m on board yet.”

Shep­herd said it’s im­por­tant that the fi­nal pro­posal in­volve trans­fer­ring some ex­ist­ing state rev­enue to high­ways be­fore law­mak­ers con­sider the pos­si­bil­ity of rais­ing taxes.

Un­der Hutchin­son’s high­way plan enacted by the Leg­is­la­ture in 2016, the state largely taps sur­plus gen­eral rev­enue and state trea­sury in­ter­est earn­ings to raise about $50 mil­lion a year to match fed­eral funds of $200 mil­lion a year.

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).

Hutchin­son has said he prefers re­fer­ring a high­way fund­ing plan to vot­ers.

He also wants to in­clude in that plan a per­ma­nent ex­ten­sion of the half-cent sales tax for high­ways that vot­ers passed in 2012 and that ex­pires in 2023.

The gov­er­nor hasn’t spelled out how large of a high­way fund­ing plan he fa­vors. State Depart­ment of Trans­porta­tion of­fi­cials have es­ti­mated their long-term fund­ing needs at about $478 mil­lion a year. Se­nate Pres­i­dent Pro Tem­pore Jim Hen­dren, R-Sul­phur Springs, said, “I’m re­ally hope­ful we’ll get some­thing we’ll all get be­hind.

“I don’t think the de­tails are re­ally firm yet,” he said late Fri­day.

Rep. Mark Low­ery, R-Maumelle, said Thurs­day that he firmly backs Hutchin­son’s tax-cut leg­is­la­tion.

“I think we have to lead with the tax cuts be­fore we take up the high­way fund­ing is­sue, and there is just some that kind of got it back­wards,” he said. “I don’t want to have to go back this week­end to my con­stituents and say, ‘I just ap­proved a tax in­crease for high­ways, but there is a tax cut com­ing.’

“You want to lead strate­gi­cally with the tax cuts first,” Low­ery said. “I think ev­ery­one un­der­stands we have got to do some­thing with high­way fund­ing.”

House Repub­li­can leader Mar­cus Rich­mond of Har­vey said Thurs­day, “We are go­ing to pro­vide a tax cut and then we are go­ing to turn around and pos­si­bly in­crease taxes … and it is not good op­tics as far as peo­ple are con­cerned and you get some blow­back on that.

“I get emails say­ing, ‘Don’t cut taxes, fix our high­ways.’ … These are some real peo­ple in my dis­trict,” he said in an in­ter­view.

“At this point, I still sup­port the gov­er­nor’s tax cut be­cause I think we need to do that and then move on. That way we will know what the rev­enue sit­u­a­tion is, and we can move on and de­cide how best to ad­just the other. At the same time, I don’t think we should leave un­til we got our [high­way plan]. We have kicked that down the road too many times, and the cost is never go­ing to go down. It is go­ing to keep grow­ing,” Rich­mond said.

Rich­mond said he’s not ex­pect­ing

“a lot of sup­port from our Demo­cratic col­leagues” on Hutchin­son’s in­come tax cut leg­is­la­tion “so, you got to have a pretty solid group of sup­port­ers to get past that 75-vote thresh­old, so just a cou­ple of peo­ple will shoot it down.”

But Rep. Mark Perry, D-Jack­sonville, said Thurs­day that he’s un­de­cided about the in­come tax cut.

“I haven’t re­viewed it, but I am look­ing at it,” he said. “I need more in­for­ma­tion.”

Perry said he wants to learn more about the lat­est tax plan, com­pared with the pre­vi­ous ver­sion.

SB211 fell two votes short of the 27 re­quired for ap­proval in the 35-mem­ber Se­nate on Tues­day. But then it cleared the cham­ber in a 28-5 vote Wed­nes­day, with af­fir­ma­tive votes from two Democrats and a Repub­li­can who didn’t vote on the bill Tues­day.

Hutchin­son un­veiled his lat­est pro­posal Jan. 31. It is his third ver­sion since Fe­bru­ary 2018 of a plan to cut the top in­di­vid­ual in­come tax rate.

The pre­vi­ous pro­posal was pro­jected to re­duce rev­enue by nearly $192 mil­lion af­ter be­ing fully im­ple­mented. But it ran into a snag sev­eral weeks ago af­ter of­fi­cials con­cluded that roughly 200,000 tax­pay­ers would pay more than $30 mil­lion more in in­come taxes.

If enacted, an in­come tax cut ap­proved this year would be the third since Hutchin­son took of­fice in 2015.

SB211 would cut the top rate to 6.6 per­cent, ef­fec­tive Jan. 1, 2020, and then to 5.9 per­cent, ef­fec­tive Jan. 1, 2021. The mea­sure also would cut the num­ber of rates in the up­per-in­come tax ta­ble from six to four, ef­fec­tive Jan. 1, 2020, and from four to three, ef­fec­tive Jan. 1, 2021.

The cur­rent top rate of 6.9 per­cent ap­plies to peo­ple with at least $79,300 a year in 2018 tax­able in­come. The Depart­ment of Fi­nance and Ad­min­is­tra­tion ex­pects that fig­ure to “move to ap­prox­i­mately $80,500” when ad­justed for in­fla­tion this fall, agency spokesman Scott Hardin said.

In the mid­dle-in­come tax ta­ble — for peo­ple who earn be­tween $22,500 and $80,500 — SB211 also would cre­ate a mid­dle-in­come tax rate of 5.9 per­cent, rather than the cur­rent 6 per­cent. It would ap­ply to the por­tion of in­come that is at least $37,500.

About 579,000 tax­pay­ers would re­ceive a tax cut un­der SB211, the state Depart­ment of Fi­nance and Ad­min­is­tra­tion es­ti­mated.

Ex­am­ples of the cuts in this plan would be $12 for a per­son with net tax­able in­come of $50,000; $37, in­come of $75,000; $59, in­come of $80,501; $253, in­come of $100,000; $503, in­come of $125,000; and $753, in­come of $150,000, ac­cord­ing to the gov­er­nor’s of­fice.

The tax cut in this plan would be $1,750 for a per­son with net tax­able in­come of $250,000; $4,250, in­come of $500,000; $6,750, in­come of $750,000; and $9,250, in­come of $1 mil­lion, af­ter it’s fully im­ple­mented, ac­cord­ing to the fi­nance depart­ment.

SB211 would re­duce rev­enue

by $25.6 mil­lion in fis­cal 2020, $48.5 mil­lion more in fis­cal 2021, and $22.9 mil­lion more in fis­cal 2022, the depart­ment said in its fis­cal im­pact state­ment on the bill.

In 2015, the Leg­is­la­ture passed Hutchin­son’s plan to cut rates for peo­ple earn­ing be­tween $21,000 and $75,000 a year in tax­able in­come. State of­fi­cials pro­jected that tax cut would re­duce rev­enue by about $100 mil­lion a year.

In 2017, the Leg­is­la­ture ap­proved Hutchin­son’s plan to cut the rates for peo­ple earn­ing up to $21,000 a year in tax­able in­come. State of­fi­cials fore­cast that cut would trim tax rev­enue by $50 mil­lion a year. The tax cut took ef­fect on Jan. 1 of this year.


The dead­line for state law­mak­ers to file con­sti­tu­tional amend­ments is Wed­nes­day.

So far, only four pro­posed con­sti­tu­tional amend­ments have been in­tro­duced.

Hen­dren said he’s seen drafts of pro­pos­als to over­haul the state’s tort laws.

“It is rules or caps,” he said re­fer­ring to the pro­pos­als. “Right now, there is prob­a­bly a lit­tle bit more sup­port for caps [on cer­tain law­suit dam­ages] be­cause it is sim­pler and eas­ier to un­der­stand. It’s some­thing that is done in many other states. I don’t think that’s fi­nal yet, but I would be sur­prised if one of those does not make the bal­lot.”

The Se­nate and House State Agen­cies and Gov­ern­men­tal Af­fairs Com­mit­tees de­cide which pro­pos­als their cham­bers con­sider.

“We’ll just have to open the Pan­dora’s box on Wed­nes­day and see what’s there,” said Se­nate com­mit­tee chair­man Ron Cald­well, R-Wynne, who said he’s only heard about a few pro­pos­als.

The other pro­pos­als per­tain to elec­tions, sov­er­eign im­mu­nity and leg­isla­tive ses­sions.


Rep. Andy Davis, R-Lit­tle Rock, said that a week from Mon­day is the ear­li­est he ex­pects to file the 1,500-plus page bill that would im­ple­ment Hutchin­son’s plan to re­duce the num­ber of state agen­cies that re­port to him from 42 to 15.

Davis al­ready has filed 16 sep­a­rate bills that will be in­cluded in the con­sol­i­dated bill for re­view by the pub­lic and law­mak­ers.

The House and Se­nate State Agen­cies and Gov­ern­men­tal Af­fairs Com­mit­tees have been re­view­ing the bills since the ses­sion started Jan. 14.

Dur­ing the Se­nate com­mit­tee’s meet­ing Thurs­day, Sen. Jimmy Hickey, R-Texarkana, asked about a pro­vi­sion in House Bill 1216 by Davis that would re­quire the Arkansas State Po­lice to main­tain its head­quar­ters in Pu­laski County. Ex­ist­ing state law re­quires the Arkansas State Po­lice head­quar­ters to be in Lit­tle Rock.

Amy Fecher, the state chief trans­for­ma­tion of­fi­cer, said, “We will be see­ing huge ef­fi­cien­cies in fa­cil­i­ties” un­der the gov­er­nor’s trans­for­ma­tion plans and the leg­is­la­tion would give the state the op­tion to put the state po­lice head­quar­ters else­where in cen­tral Arkansas, such as in North Lit­tle Rock.

That later led Sen. Will Bond, D-Lit­tle Rock, to ask if there is a par­tic­u­lar plan to move the state po­lice head­quar­ters.

Fecher replied, “No, there is not.”

The Arkansas State Po­lice would be in the Cab­i­net-level Depart­ment of Pub­lic Safety un­der HB1216. Six­teen other state en­ti­ties, in­clud­ing the Crime Lab­o­ra­tory, Depart­ment of Emer­gency Man­age­ment, Arkansas Crime In­for­ma­tion Cen­ter and Arkansas Com­mis­sion on Law En­force­ment Stan­dards and Train­ing would be merged un­der the Depart­ment of Pub­lic Safety un­der this pro­posal.

Jett Hutchin­son





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