A bill that would exempt military retirement benefits from income taxes and cut the special excise tax on soft-drink syrup cleared the Arkansas Senate on Tuesday without a dissenting vote after Senate Republican leader Jim Hendren said he disagrees with Americans for Tax Reform President Grover Norquist's characterization of the measure as a tax increase.
Senate Bill 120 by Sen. Jane English, R-North Little Rock, also would increase the 1.5 percent sales tax on candy and soft drinks to 6.5 percent, levy income taxes on unemployment compensation and impose a sales tax on certain digital products to pay for these tax cuts.
The Senate voted 30-0 to send SB120 to the House for further consideration. Four senators were recorded as voting "present," and Sen. Bryan King, R-Green Forest, was recorded as not voting.
The Senate Revenue and Taxation Committee will consider the identical House-approved bill -- House Bill 1162 by Rep. Charlene Fite, R-Van Buren -- this morning, said committee Chairman Jake Files, R-Fort Smith.
The military retirement-benefit tax exemption is projected to cut general revenue by $6.7 million when it takes effect in mid-fiscal 2018 and then $13.4 million in fiscal 2019, according to the state Department of Finance and Administration. That estimate is based on 29,009 retired taxpayers who receive a pension, and the raw average benefit for each retiree would be $462 a year, said Lynne Reynolds, income tax administrator for the Department of Finance and Administration.
Under existing state law, the first $6,000 in retirement benefits is exempt from state income taxes.
"Today, we can place priority on our veterans," said Sen. Trent Garner, R-El Dorado.
"We can say to them, 'We want you to come here. We want you have that job. We want you to bring that next business,'" said Garner, who served two tours in Afghanistan with the U.S. Army Special Forces.
Norquist said in an email to state lawmakers Monday that "while a number of good tax reform proposals are being discussed, it's important that lawmakers first do no harm by rejecting calls to impose new and higher taxes."
"Some misguided tax hikes have been proposed targeting soda, candy, and digital downloads. I urge you to reject those proposals, which are problematic for a host of reasons, and instead focus on ways to improve the tax code," Norquist wrote in his email.
But Hendren, of Suphur Springs, told senators Tuesday that the legislation is "revenue neutral" and not a net tax increase -- no matter what Norquist says.
He said Norquist, who is president of the Washington, D.C.-based group, has "used the military as a tool" for five years to try to reduce the federal government's domestic spending as part of sequestration, and that's hurt the nation's armed forces.
"I have no patience for that guy to come tell us" what the state's priorities should be regarding veterans and the state tax code, said Hendren, who is a colonel in the Missouri Air National Guard.
Americans for Tax Reform urged state senators Tuesday in a written statement "to reject these problematic tax hikes, which they can do by supporting [Rep.] Bob Ballinger's alternative bill, which will provide a tax exemption for veterans, while avoiding higher taxes on digital downloads, soda and candy." Ballinger, R-Hindsville, on Monday introduced House Bill 1399, which would exempt military retirement benefits from income taxes without changing other taxes.
HB1162 and SB120 also would reduce the special excise tax levied on bottled soft drinks and soft-drink powders from 21 cents to 20.6 cents per gallon, and the tax for each gallon of soft-drink syrups from $2 to $1.26. It also would transfer $3 million in fiscal 2018 to the Medicaid program to offset the reduction in that tax and would transfer $5.9 million in fiscal 2019.
The measures also would levy the 6.5 percent sales-tax rate on candy and soft drinks, rather than the reduced sales-tax rate of 1.5 percent on foods, to raise $6.9 million in fiscal 2018 and $13.8 million in fiscal 2019; make unemployment compensation benefits subject to state income taxes, to raise $1.6 million in fiscal 2018 and $3.1 million in fiscal 2019; and levy a sales tax on sales of certain digital products -- including "digital audio works, digital audio visual works and digital books," as well as on sales of digital codes that allow the consumer to access these products -- to raise $1.2 million in fiscal 2018 and $2.4 million in fiscal 2019.
Sen. Linda Collins-Smith, R-Pocahontas, said that "it's offensive to me" to suggest that she doesn't support veterans because she doesn't support the legislation.
"We are opening the door to taxes on the Internet" by imposing the sales tax on certain digital products, she said.
Collins-Smith was one of four senators who voted present on SB120. The three others are Sens. Alan Clark, R-Lonsdale; Scott Flippo, R-Mountain Home, and Stephanie Flowers, D-Pine Bluff.
A Section on 02/01/2017