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Tax panel rejects bids to analyze state's code

by Michael R. Wickline | July 12, 2017 at 3:30 a.m.

A legislative tax-overhaul task force decided Tuesday to re-advertise for consulting firms to assist it in its work, after receiving only two proposals.

"We're beginning to look at the responses [to the request for proposals, and] it looks like both of them are a little bit deficient on submitting the required information," Jill Thayer, legal counsel to Bureau of Legislative Research Director Marty Garrity, told the task force at its Tuesday meeting.

The task force needs a tax consultant to be able to answer questions about details of the tax overhauls enacted in states such as North Carolina and Indiana, the panel's co-chairman, Sen. Jim Hendren, R-Sulphur Springs, said.

PFM Group Consulting LLC of Philadelphia and WC Mitchell & Associates Inc. of North Little Rock were the only proposals received by the Bureau of Legislative Research by Monday's deadline.

Hendren said the task force could consider the two companies that submitted proposals "even though they are somewhat deficient," or "we can cancel the [request for proposals] and ask for it to be let again, which would delay us for 30 days.

"I think right now the best thing to do is to cancel it and be more diligent and active in pursuing some other submitters, so we get a bigger pool to pull from and make sure that we get the best possible representation," Hendren said.

The panel of 16 legislators approved a motion by Rep. Bob Johnson, D-Jacksonville, to cancel the initial request for proposals.

Under state law, the Tax Reform and Relief Task Force is required to present a preliminary report by Dec. 1 and recommend legislation for the General Assembly by September of next year for enactment in the 2019 legislative session.

The December report can say, "We're still working, and we'll get back to you," Hendren said.

The Bureau of Legislative Research plans to issue the new request for proposals on Thursday, Thayer said.

The deadline for companies to submit proposals will be Aug. 10 at 4:30 p.m.

During its Aug. 31 meeting, the task force will decide which companies will make presentations during its Sept. 7 meeting, said task force Co-Chairman Rep. Lane Jean, R-Magnolia.

The Legislative Council will then decide which company to hire, and it will consider the proposed contract with the company on Sept. 15.

Hendren has said he hopes the consultant's cost will be less than the roughly $2 million that it cost for a consultant for the Legislature's health care task force because "we are not talking about something that is nearly as complicated as federally mandated programs like Medicaid and health care."

The Tax Reform and Relief Task Force was created under Acts 78 and 79 during this year's regular legislative session.

The Legislature approved Gov. Asa Hutchinson's plan to cut individual income taxes for Arkansans with less than $21,000 in taxable income effective Jan. 1, 2019. This plan is projected to reduce state general revenue by $25 million in fiscal year 2019 and by $50 million each year thereafter.

The task force was created after legislators approved two income tax cuts promoted by Hutchinson in 2015 and this year affecting individuals who earn up to $75,000 a year, though the one approved this year won't take effect until 2019.

The 2015 tax cut was expected to reduce state revenue by $100 million in the fiscal year ended June 30.

Some lawmakers favor larger income tax cuts, particularly for Arkansans with more than $75,000 in taxable income, and the task force was created in part because of those concerns.

Hutchinson, a Republican, has said he wants to continue cutting individual income tax rates.

But Rich Huddleston, executive director of Arkansas Advocates for Children and Families, told the task force Tuesday that the recent experiences of states such as Indiana, Kansas, Louisiana, North Carolina, Oklahoma and Wisconsin have shown that "the promised economic benefits of big tax cuts -- especially big tax cuts, especially big personal income tax cuts -- often fail to materialize and can have disastrous consequences for state budgets, leading to cuts in critical services, including education."

Many of those states have turned to working families, especially low-income families, to make up the difference either in budget cuts by reducing services or increasing taxes on the poor, he said.

Jean pressed Douglas Lindholm, executive director of the nonprofit, Washington, D.C.-based Council on State Taxation that represents than 600 multistate corporations, to talk about states that have changed their tax policies and created jobs and improved their economies.

Lindholm suggested that state lawmakers "look at what North Carolina has done."

"North Carolina has done a great deal of simplifying and reducing [tax] rates and balancing their tax burden out," Lindholm said. "I think that is probably a great example of a state that has done the most surgical operation on their tax code. It seems to be working."

Kathleen Quinn, a research analyst for the National Conference of State Legislatures, said North Carolina has enacted individual and corporate income tax changes by lowering tax rates and broadening the base for both taxes in recent years.

North Carolina has changed its individual income taxes to a flat rate of 5.499 percent and lowered the corporate income tax from 6.9 percent to 3 percent using a trigger based on state tax collections to phase in the business cuts, she said.

"North Carolina has seen very positive revenue growth and economic growth in this time after the [tax] reform period," Quinn said. "I think it's also important to note that it might not all be due to taxes. It might be having something to do with the area that the state is in or its economy, but they have experienced strong revenue outlooks since then."

Rep. Jana Della Rosa, R-Rogers, said it sounds like North Carolina increased individual income taxes "on the poor folks because, if you're going to a flat rate, it's going to do that, and, especially if you're getting rid of exemptions and deductions, which is something that those in the low bracket are probably are more dependent on."

Metro on 07/12/2017

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