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Arkansas tax-redo body has first talks

Chair: Too early to vow specifics by Michael R. Wickline | May 23, 2017 at 4:30 a.m.

Sen. Jim Hendren advised members of a new tax overhaul task force Monday to steer clear of making commitments to protect specific tax exemptions or promising changes in tax policy before the group considers the merits of any proposals.

"I don't think we are going to have a shortage of people wanting to give input to the recommendations of this task force," Hendren, R-Sulphur Springs, told the 16-member panel in its first meeting at the state Capitol.

"We are going to have lots of public input, and there is going to be lots of opportunity for folks -- both groups and individuals -- to make their points of view heard," Hendren assured the Tax Reform and Relief Legislative Task Force after being elected co-chairman of the group.

Task force members also elected Rep. Lane Jean, R-Magnolia, as the co-chairman from the House of Representatives.

Hendren, whose uncle is Republican Gov. Asa Hutchinson, also is the Senate Republican leader. Jean also is a co-chairman of the Joint Budget Committee.

The task force was created under Acts 78 and 79 during this year's regular session, in which the Legislature approved Hutchinson's plan to cut individual income tax rates for Arkansans with less than $21,000 in taxable income, effective Jan. 1, 2019. Such cuts would reduce state general revenue by $25 million in fiscal 2019 and $50 million in each fiscal year thereafter, state officials project.

It was created in part to placate some lawmakers who favor larger income-tax cuts, particularly for Arkansans with more than $75,000 in taxable income.

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The panel is expected to present a preliminary report by Dec. 1 and recommend legislation for the General Assembly by September next year for enactment in the 2019 legislative session. Its next meeting is June 7.

Hendren encouraged fellow legislators on the panel Monday not to "make commitments and promises about exemptions or policy until we go through the process, because you will get tremendous pressure to do that as we move forward."

"I think this is intended to be and designed to be a top-to-bottom look where every exemption gets the opportunity to justify [itself]," he said.

The state's tax exemptions vary widely from sales-and-use tax exemptions for agricultural interests, motor fuels, newspapers and industrial machinery to income-tax deductions for charitable contributions, according to a 35-page list from the state Department of Finance and Administration.

The state also has a variety of economic development incentive and tax-credit programs.

House Speaker Jeremy Gillam, R-Judsonia, said he expects the task force will have "a very robust debate that will take place over the next year or year and a half as to our tax policy here in Arkansas."

"I know a lot has been written about the mandates [of the task force] and it seems to always be mentioned that it's about which tax cuts are going to be put forth in the next General Assembly," he told the group.

"I think you are all familiar with the fact that that is not necessarily the overriding mandate to this task force. It's to look at reform and relief and making Arkansas competitive in our surrounding areas to make sure that we have a viable tax policy," Gillam said.

Under Acts 78 and 79, the task force's purpose is to consider ways to modernize and simplify the state's tax code, make the tax laws competitive with other states to attract businesses to the state, create jobs for Arkansans, and "ensure fairness to all individuals and entities" affected by state tax laws.

Hutchinson, asked if he had a particular plan that he wants the task force to consider, said in a written statement that "the Tax Reform Task Force should be given broad latitude to explore options for reform measures in the future."

"My support for and focus on reducing the income tax rate in Arkansas is widely known, and I hope this will be an area of focus for the committee. I also know they will be looking at any potential exemptions that should be closed in Arkansas, and I look forward to their recommendations on any exemptions that have outlived their usefulness," the governor said.

The 2015 Legislature enacted Hutchinson's plan to cut individual income-tax rates for Arkansans with taxable income between $21,000 and $75,000. That tax cut is projected by the state to reduce general revenue by $100 million in fiscal 2017, which ends June 30.

Nearly a month ago, Hutchinson cut the state's $5.33 billion general revenue budget in fiscal 2017 by $70 million, citing lagging sales tax and corporate income tax collections.

He also trimmed the state's $5.49 billion general revenue budget by $43 million in fiscal 2018, which begins July 1.

The state's two largest sources of general revenue are individual income taxes and sales-and-use taxes.

Nationally, there has been a trend of net reductions in state personal and corporate income taxes, according to a new National Conference of State Legislatures report.

"This is the result of a continued phase-in of major tax reduction packages passed during previous legislative sessions," the conference said in the report issued last week.

"Increases in sales and use, health, tobacco, and motor fuels-related taxes led to a $2.3 billion revenue increase across all reporting states," according to the group.

Hendren said he expects the task force to meet one day a month in the first month or two, and he could see meeting two consecutive days a month after that.

Jean told the task force that "our charge is that we get a consensus out of this committee and that we look throughout the state."

"I look forward the next year trying to come up with something that will allow Arkansas to grow its economy," Jean said.

Task force member Rep. Warwick Sabin, D-Little Rock, told his colleagues that "I think it is important for us to have the opportunity outside of the certain maelstrom of a legislative session to really dig in deep into these issues, so we can find those areas of consensus which I believe exist."

In the 2015 and 2017 sessions, Sabin made unsuccessful pushes for legislation to create an earned income tax credit for low-income Arkansans.

Task force member Rep. Bob Johnson, D-Jacksonville, told the group that, as a certified public accountant, he's looking forward to simplifying the tax code and "making regular Arkansans able to do their own taxes and not have to pay me."

Task force member Sen. Larry Teague, D-Nashville, told his colleagues about serving on a blue ribbon tax commission in the late 1990s and 2000.

"I recall that I learned a lot. I don't recall that a lot came out of that. But I am optimistic that we can accomplish that," said Teague, who also is a co-chairman of the Joint Budget Committee.

Afterward, Hendren said he has been co-chairman of the public school employees' insurance and health care task force and "both of those led to concrete changes in the law and savings to the taxpayer."

"I'm not interested in spending a year to put some report to be filed on a shelf somewhere. It will lead to changes in our tax code," he said.

A Section on 05/23/2017

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