Democratic gubernatorial candidate Mike Ross said Thursday that he wants to cut the state’s sales and use tax on the partial replacement and repair of machinery used in manufacturing.
This tax unfairly punishes manufacturing plants already in Arkansas, because state law already exempts new plants and plant expansions, said the state’s former 4th District congressman.
Ross said he wants to gradually reduce the tax, saying the move will help bolster manufacturing and help Arkansas compete with neighboring states.
Cutting the state’s sales and use tax on partial replacements and repairs of manufacturing machinery and equipment “will encourage our current manufacturers to upgrade their facilities so they can modernize, remain competitive and continue to grow and hire more workers,” Ross said in a statement prepared for the Southwest Arkansas Industry Conference in Arkadelphia.
“By gradually phasing out the sales and use tax on manufacturing repairs and replacements, just like we did on the grocery tax, we will also ensure this tax cut doesn’t disrupt our state’s balanced budget,” Ross said, according to a copy of the remarks provided by his campaign. Since 2007, Democratic Gov. Mike Beebe has persuaded the Legislature to gradually cut the state’s sales tax on groceries from 6 percent to 1.5 percent.
Act 1404 of 2013 will effectively lower the tax rate on manufacturing repairs and replacement from 6.5 percent to 5.5 percent starting July 1, 2014.
Act 1404 is projected to reduce tax revenue by $6.9 million in fiscal 2015 and $7.3 million in fiscal 2016, according to the state Finance and Administration.
Ross said he ultimately wants to cut the tax rate on repair parts and replacement machinery to 0.625 percent, which would cut state tax revenue by about $40 million a year. That would leave in place the state’s voter-approved 0.5 percent sales tax for highways and 0.125 percent sales tax for conservation.
“I have been told by job creators that this is a big issue,” he said in an interview before Thursday’s speech.
Ross said the timing of the tax cuts would depend on the size of the state’s surplus and the strength of the state’s economy.
He said he’ll release his other tax-cut proposals during the next year, adding “we are still working on our policy proposals at this point.”
Ross said the state needs “state income tax reform, but … it needs to be done in a way that can be paid for, it needs to target working families and seniors who need it most, and it needs to target job creation in this state, all while protecting the funding of vital state services.”
He has repeatedly criticized Republican gubernatorial candidate Asa Hutchinson of Rogers for not providing more details about his plans to gradually cut the state’s income taxes.
Hutchinson said Ross’ tax cut proposal released Thursday is rather general.
The state would be better off to grant across-the-board income tax cuts implemented over a period of years rather than “a special targeted tax cut for industry,” he said in an interview.
Hutchinson said Ross’ taxcut philosophy is like Democratic President Barack Obama’s.
Hutchinson, a former 3rd district congressman and federal homeland security undersecretary, said he would release details of his plans to gradually phase in cuts of state income taxes “before football season is over” this fall.
Republican gubernatorial candidate Debra Hobbs of Rogers, a state representative, said she favors across-the board income tax cuts and not targeted income tax cuts.
She said she supports getting rid of the state’s sales tax on replacement and repairs of machinery. “If we can afford it, we just need to go ahead and do it. We need to be fiscally responsible in whatever we do,” she said in an interview.
Republican gubernatorial candidate Curtis Coleman of Little Rock, a businessman, said in an email that the state’s economic problems “will not be solved by making one or two quick fixes. To become economically competitive and even outpace surrounding states in private-sector job creation, we need true, comprehensive reform.”
Arkansas, Pages 10 on 10/25/2013