Back to business, now that the snow has mostly melted.
The Arkansas General Assembly has a handful of bills before it now to help those Arkansans--and businesses owned by Arkansans--that have been kept afloat during the pandemic through government assistance. These bills should be commended. And promptly passed.
The bills would keep people from paying income taxes on money they received from relief packages. Not a terribly exciting subject--unless you happen to be among the thousands and thousands of Arkansans who received such aid. And paying a whole lot of it back to the government could be the difference between closing shop and keeping your business running.
First, there's House Bill 1361, which would change the state's income tax law (passed in 1929). Thanks to Michael Wickline for explaining it in Monday's newspaper: "The bill would exclude from the definition of income the financial aid that a taxpayer received through certain federal coronavirus relief programs, including loan forgiveness under the Paycheck Protection Administration grants . . . . and payments received under the Coronavirus Food Assistance Program . . . ."
And the important part, or one of the important parts: "If enacted, HB1361 would be effective retroactively to tax years starting on or after Jan. 1, 2019."
There are a couple of other important bills, most notably Senate Bill 236, which would keep Arkansans from having to pay state income taxes on unemployment benefits in 2020 and this year. Another bill, HB1049, would allow those receiving this money to have the state withhold taxes for later, because now the state doesn't have that capability. Talk about adding injury, imagine receiving unemployment benefits for several months during a year, then getting slammed with a tax bill come April 15.
A few business owners and chamber types testified in favor of the proposed legislation. The bills make sense, especially given the state's surpluses. Thank you, Gov. Asa Hutchinson and General Assembly.
The news side's story was remarkable in its detail. For example, how many millions were projected for the state's budget, and how many millions more than that actually came in during a pandemic year (!) and how many of the federal government's "loans" were forgiven, which turned them into grants, etc. But the best argument for the legislation came from Les Eaves, a state representative from Searcy:
"It is important to remember that these loans received through the [Paycheck Protection Program] allowed businesses to keep all of their employees on payroll, even as their machines sat idle in factories," he said.
Then he added: "With tax filing season underway, scores of business owners are discovering that painful reality that these PPP loans could still carry a hefty tax bill, courtesy of the state of Arkansas. This approach runs counter to the federal government's own treatment of the loans, which were seen as a crucial lifeline for small business amid the pandemic."
The fact of the matter is that these businesses need the money more than the state of Arkansas needs it. And if the federal government doesn't tax this aid, why should the state?
But maybe even a better argument is made in favor of the bills by some of those opposed. One analyst was quoted in the papers saying HB1361 would reduce state revenue by $200 million or more over two years. And that "scarce public revenue" should be better directed at those with greater need.
First, who has a greater need than the business owner with employees on the payroll?
Second, the argument would work better if public revenue was really scarce. The state of Arkansas, which is running an unprecedented surplus during fiscal 2021, can afford these bills. We endorse.