High­ways top NWA’s pri­or­i­ties in ses­sion

Gov­er­nor touts re­gional ad­van­tages of tax re­form

Westside Eagle-Observer - - SCHOOL/NEWS - DOUG THOMP­SON dthomp­[email protected]

FAYET­TEVILLE — Money for roads is the most vi­tal is­sue for North­west Arkansas in the com­ing leg­isla­tive ses­sion, po­lit­i­cal lead­ers and the gov­er­nor said.

State high­way money is about $400 mil­lion a year short of needs, ac­cord­ing to Arkansas Trans­porta­tion Depart­ment es­ti­mates. The gov­er­nor wants the Leg­is­la­ture to come up with more money, which would prob­a­bly re­quire a tax in­crease rather than shift­ing ex­ist­ing rev­enue. He said any such in­crease should prob­a­bly be re­ferred to the vot­ers on the 2020 ballot.

Law­mak­ers will try to reach a con­sen­sus dur­ing the ses­sion, but the specifics of a pro­posal are a long way off, leg­is­la­tors said.

“More so than any other re­gion in the state, we should be in­ter­ested in the solution the Leg­is­la­ture comes up with for high­ways,” said Sen. Jim Hen­dren, R-Sul­phur Springs. The long­time Ben­ton County law­maker is the in­com­ing pres­i­dent pro tem­pore of the Se­nate.

“Our growth in pop­u­la­tion and eco­nomic de­vel­op­ment puts a real strain on our in­fra­struc­ture, and it could end up stran­gling our op­por­tu­nity for growth,” Hen­dren said. “Find­ing a solution will not be easy but is very im­por­tant to North­west Arkansas.”

Gov. Asa Hutchin­son and Sen.-elect Greg Led­ing, D-Fayet­teville, agreed. Led­ing is the only Demo­cratic sen­a­tor from Washington or Ben­ton coun­ties.

“Ob­vi­ously, it’s the high­way bill,” Hutchin­son said. “The ideas on that are still be­ing for­mu­lated, but it im­pacts North­west Arkansas greatly.”

Hutchin­son is the first gov­er­nor born and raised in Ben­ton County. Over­all, six state sen­a­tors and 14 state rep­re­sen­ta­tives live in Ben­ton and Washington coun­ties. One sen­a­tor and three rep­re­sen­ta­tives from the re­gion are Democrats, with the rest be­ing Repub­li­cans.

The fact a new high­way bill is still very much a work in progress means North­west Arkansas can and should take an ac­tive role in shap­ing it, Hutchin­son said. The re­gion’s in­flu­ence should be felt, he said. How they shape it is up to them, he said.

Hutchin­son signed a high­way fund­ing bill in May 2016, but that mea­sure used cash re­serve built up over years and in­ter­est earned on the re­serve. The $50 mil­lion one-time mea­sure took ad­van­tage of $200 mil­lion a year for five years of­fered by the fed­eral gov­ern­ment for road projects. The mea­sure passed in a spe­cial ses­sion of the Leg­is­la­ture.

Crit­ics in­cluded Se­nate mi­nor­ity leader Keith In­gram, D-West Mem­phis. The mea­sure drew down the state re­serve with­out ad­dress­ing long-term high­way needs, In­gram said at the time. The sen­a­tor de­scribed the pro­gram as a “Band-Aid.” Ear­lier ef­forts to raise taxes on fuel made no progress.

Be­fore the 2016 mea­sure, the last in­crease in taxes for roads was in 2012. It’s a tem­po­rary mea­sure that ex­pires af­ter 2022. Vot­ers ap­proved a 0.5 per­cent in­crease in state sales taxes to im­prove in­ter­states within the state.

Hen­dren agreed any pro­posal to in­crease taxes for high­ways will likely go to the vot­ers for ap­proval. The state’s con­sti­tu­tion re­quires a three-quar­ters ma­jor­ity vote in each cham­ber of the Leg­is­la­ture to pass an in­crease in most taxes.

“That is why big pro­grams are punted out to the peo­ple, and ad­di­tional gas taxes or some­thing else will prob­a­bly go to a vote,” Hen­dren said.

High­ways will ob­vi­ously be big, Led­ing said, but at least one other an­tic­i­pated mea­sure will prob­a­bly not live up to ex­pec­ta­tions. Peo­ple are ex­pect­ing too much out of a pro­posal to start col­lect­ing city sales taxes on pur­chases through the In­ter­net, he said.

Ama­zon is the largest on­line re­tailer, and it al­ready col­lects local sales taxes, Led­ing said. Cities ex­pect­ing a wind­fall out of a bill to make other on­line re­tail­ers pay their share may be setting them­selves up for dis­ap­point­ment, he said.

A bill that will have more im­pact on the North­west Arkansas re­gion than peo­ple read­ily ex­pect is the plan to the cut the top rate of the state’s in­come tax, Hutchin­son said. Hutchin­son pro­poses to re­duce the rate from 6.9 per­cent to 5.9 per­cent over three years.

“That top in­come tax rate hurts our re­cruit­ing of top tal­ent to Arkansas com­pa­nies, and I hear that daily when I’m in North­west Arkansas,” the gov­er­nor said.

Sev­eral of the na­tion’s largest cor­po­ra­tions have head­quar­ters in the re­gion.

“I was talk­ing re­cently with the gov­er­nor of Mas­sachusetts, and he was dumb­founded when I told him what our top rate was and at what in­come level peo­ple started pay­ing the top rate,” Hutchin­son said. Arkansas’ top tax rate be­gins at $79,300 a year, state tax ta­bles show. Mas­sachusetts has a flat in­come tax rate of 5.1 per­cent.

Arkansas’ top in­come tax rate is sur­passed by 15 other states, a com­par­i­son of tax rates show, but is higher than any sur­round­ing state. States with higher in­come tax top brack­ets in­clude Cal­i­for­nia, New York and Min­nesota. Many of the states with higher rates also have the top tax bracket that af­fects higher in­comes, Hutchin­son said.

The re­cruit­ment is­sue is a valid one, said Cameron Smith of Cameron Smith and As­so­ci­ates, an ex­ec­u­tive re­cruit­ing firm in Rogers.

“When we are re­cruit­ing ex­ec­u­tives here from other states, the Arkansas tax rate can be a bar­rier, es­pe­cially if they are com­ing from Texas, Ten­nessee or Florida where there is no state tax,” Smith said Thurs­day. “We try our best to off­set the ad­di­tional rate by help­ing the can­di­date ne­go­ti­ate a higher salary. Nor­mally a 15 per­cent in­crease in com­pen­sa­tion is con­sid­ered a fair in­crease.”

The gov­er­nor’s plan would re­quire a three­quar­ters vote in the Leg­is­la­ture be­cause it would raise the tax rate on some as it re­duces the num­ber of tax brack­ets, even though it of­fers some in­creases in tax de­duc­tions. The Leg­is­la­ture has al­ter­na­tive plans it could con­sider, for­mu­lated by a leg­isla­tive task force.

The Leg­is­la­ture wants to avoid the bud­get crises cre­ated by ex­ces­sive tax cuts in other states such as Ok­la­homa and Kansas, Hen­dren said.

“We had leg­is­la­tors from both those states come talk to the task force, and I re­spect them for giv­ing us the straight story on that,” he said. “They have bud­gets in dis­tress and told us about how you have to be pru­dent about im­ple­ment­ing tax re­form. With any large tax re­form pack­age, you have to have many safety trig­gers in place so you don’t crip­ple your bud­get if there is a down­turn.

“I hope I never have to give that kind of tes­ti­mony.”

Large tax cuts can be self-de­feat­ing as an eco­nomic in­cen­tive if it cuts vi­tal ser­vices, Hen­dren said. Workforce ed­u­ca­tion is of par­tic­u­lar con­cern to North­west Arkansas, he said.

“It is a na­tional prob­lem,” Hen­dren said of find­ing and keep­ing a trained, qual­i­fied workforce. Hen­dren man­ages a plas­tics com­pany.

“I just got back from a trade show in Nashville, Tenn. Ev­ery­one there said it was get­ting more and more dif­fi­cult to find qual­i­fied peo­ple to hire.”

In ad­di­tion to adult ed­u­ca­tion, gen­eral ed­u­ca­tion and higher ed­u­ca­tion are al­ways at the top of the re­gion’s leg­isla­tive pri­or­i­ties, Led­ing said, and so is health­care.

— Photo by Sta­ton Brei­den­thal

Sen. Jim Hen­dren is shown in this file photo.

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