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Senator to vets: Push for tax exemption

by Michael R. Wickline | January 12, 2017 at 3:34 a.m. | Updated January 12, 2017 at 3:34 a.m.

Arkansas Senate Republican leader Jim Hendren of Sulphur Springs on Wednesday urged veterans across Arkansas to call their lawmakers in support of Gov. Asa Hutchinson's proposal to exempt military retirement benefits from state income taxes.

The governor's proposal is projected to reduce general revenue by $13 million a year. State law exempts the first $6,000 of a veteran's retirement benefits from income taxes. Hutchinson is Hendren's uncle.

It's part of a larger $19.3 million-a-year plan that also would reduce the tax on soft-drink syrup in exchange for levying the full sales-tax rate on the sale of candy and soft drinks, apply the sales tax on the full cost of manufactured housing, and remove the exclusion of unemployment compensation from income taxes.

But some lawmakers have questioned Hutchinson's proposal on manufactured housing, which is now taxed at 62 percent of a manufactured home's value, to raise $2.4 million a year.

"It is going to take a lot of work, and I think ... you heard all legislation is tough to get passed. Any time you're cutting back revenue to the state and adjusting revenue for the state, it's a challenge," Hendren told about 25 veterans at a news conference held by the Legislature's Veterans Caucus of 23 lawmakers and the Arkansas chapter of Vets4Energy, a nonpartisan group of veterans that recognizes the importance of energy security as it relates to national security.

"We are going to need your help. You are going to have to engage and you are going to have to help us contact legislators and tell them this is a priority for our state," said Hendren, who is a colonel in the Missouri Air National Guard. "Let's pass this thing through in the next few weeks."

J.D. Harper, executive director of the 105-member Arkansas Manufactured Housing Association, said in an interview that the proposal would increase the cost of the average new manufactured home by about $1,800 in cash based on an average purchase price of $65,000.

"If they finance it over the life of the loan, it's about $3,500, so we're not talking about a nickel or two," Harper said.

"I understand it is being tied to the veterans tax cut. We are not anti-veteran in any way. We just think there is a better place to find the funds," Harper said at the state Capitol. "We are trying to make sure that people understand that this is an increase on working people. People who buy a house from us generally make around $46,000 a year in median household income."

There are about 170,000 manufactured homes in Arkansas, and about 1,600 new mobile homes are sold each year, Harper said.

When asked about Harper's concerns, both Sen. Jane English, R-North Little Rock, and Rep. Charlene Fite, R-Van Buren, who plan to introduce Hutchinson's proposal into legislation, said in an interview that they haven't been contacted by anyone who has raised similar concerns.

"I think from the information that I have seen, as we look at the states around us, this will bring the manufactured homes more into line with the states around us," Fite said.

But Harper said, "We are already the highest [taxed] in the region. This makes us even higher."

Hendren said in an interview that he wants to make the state more competitive with other states by exempting military retirement benefits from state income taxes.

He said he has heard from people who would prefer that the Legislature not enact Hutchinson's proposal to close "a small loophole" with manufactured housing.

"If people have other alternatives, I'm willing to look at those and I think the governor has said he's willing to look at those. But to just say, 'No, I'm not going to pass this because I don't like that loophole,' and yet to offer no alternative, I think is not a good answer," Hendren said.

House Republican leader Mat Pitsch of Fort Smith and Hendren later introduced companion four-page bills that would enact Hutchinson's plan to reduce individual income taxes for Arkansans with taxable income below $21,000. Pitsch's bill is House Bill 1159 and Hendren's is Senate Bill 115.

Hutchinson's plan would reduce state general revenue by $25 million in mid-fiscal 2019 and $50 million thereafter, according to state officials.

Pitsch and Hendren's bills would each create an Arkansas Tax Reform and Relief Task Force with 16 members, including eight representatives and eight senators. The task force would be required to file a final written report with the governor, House speaker and Senate president pro tempore on or before Sept. 1, 2018, in advance of the 2019 regular session.

The bills were introduced a day after Hutchinson on Tuesday called on state lawmakers to support the creation of a legislative task force to recommend a comprehensive plan to reduce Arkansas' individual income-tax rates.

A Section on 01/12/2017

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