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story.lead_photo.caption Rep. Lane Jean, R-Magnolia, is shown in this 2016 file photo.

Legislation that would increase to $7,500 the amount of a used car's sales price that is tax exempt sailed through the House Revenue and Taxation Committee on Tuesday over a state official's opposition.

Meanwhile, a bill that would eliminate the state's individual income tax deduction for gambling losses and use the revenue gain to reduce the number of developmentally disabled people waiting for services failed to clear the committee for the second time in the past week. Reps. Lane Jean, R-Magnolia, and Robin Lundstrom, R-Elm Springs, said committee members should find another way to help reduce the waiting list.

"I wish we could include the executive branch, instead of looking to find a new revenue source to use ... on hopefully what is going to pass on the Senate end, the transformation [of state government], and find some savings to help these people," said Jean, who is a co-chairman of the Joint Budget Committee. "Let's include the second floor on this, too." The governor's office is on the second floor of the Capitol.

In a voice vote with no audible dissenters, the House tax committee advanced House Bill 1342 by Rep. John Payton, R-Wilburn, seeking to increase the sales tax exemption for used vehicles. Existing law exempts $4,000 from taxes.

The legislation also would remove the sales tax exemption on the sale of a new trailer with a selling price of less than $4,000.

[RELATED: Complete Democrat-Gazette coverage of the Arkansas Legislature]

Exempting $7,500 of a used vehicle's price from the sales tax is estimated to reduce state revenue by about $14.2 million a year. Removing the sales price threshold of $4,000 for new trailers would increase revenue by $1.6 million a year. The net reduction would be $12.6 million a year, according to the state Department of Finance and Administration.

Besides Payton, the bill has 82 co-sponsors in the 100-member House. Sen. Terry Rice, R-Waldron, is the sponsor of SB1342 in the 35-member Senate, where the bill has 10 co-sponsors.

"I am in the car business, and I have got a dealer's license," Payton told the House committee. "I am one of two members of this body that does not pay sales tax on used cars because as a dealer, of course, we put a dealer tag on there."

Making a down payment on a used vehicle if it's financed, paying for insurance to drive the vehicle and paying sales tax on the vehicle is "a real strain on people's budget, so I would appreciate it if you would help me raise this exemption to $7,500," Payton said.

But Paul Gehring, an assistant revenue commissioner for the finance department, testified against the bill.

The revenue reduction of about $12.6 million a year "is not counted for in the budget," he said.

But Payton said he believed revenue growth would cover the fiscal impact.

"I think it is an important measure that we do to give a little relief to the people who drive used cars. ... We have people who buy new cars, everybody drives used ones," he said.

Afterward, Gov. Asa Hutchinson said in a written statement, "we are already absorbing $110 million in tax cuts this year through growth.

"This includes low income tax cuts and the reduction of the grocery tax," the Republican governor said.

"In addition, we have passed other tax relief measures this session with more pending. This bill will add over $15 million in additional tax relief. While I like tax cuts, it will be difficult to include this in our balanced budget," he said.

In other action, the House committee balked for the second time at recommending approval of the bill that would ax the individual state income tax deduction for gambling losses and use the increased revenue to reduce the developmental disabilities waiting list.

At last week's meeting, the legislation drew opposition from an attorney representing Oaklawn Jockey Club.

Rep. Julie Mayberry, R-Hensley, told the House committee Tuesday that her House Bill 1653 would provide $11 million a year to the Community and Employment Supports Waiver Program in the Medicaid Program Trust Fund and $500,000 a year to state general revenue for the Legislature to decide how to use.

Based on 2017 individual income tax returns, about $244 million in gambling losses were claimed against gambling winnings in Arkansas, so the elimination of the deduction multiplied by the effective tax rate in Arkansas of 4.7 percent would raise about $11.5 million a year, according to Gehring.

Mayberry said the House voted 91-0 to approve House Bill 1491 that aims to eliminate the developmental disabilities waiting list within three years.

"But there is no funding with that [bill], and money doesn't grow on trees," she said.

Mayberry said the $11 million that her bill would raise would be matched with $25 million in federal funds, or about $36 million a year in added funding. The money could be used to reduce the waiting list of about 3,100 people by several hundred people, she said.

The committee also heard from three parents of developmentally disabled children. They spoke for the bill.

Mayberry told the committee that the gambling industry is getting stronger and stronger in the state.

The state shouldn't provide an individual income tax deduction for gambling losses and then tell families that they don't have money to provide services for people on the developmental disability wait list, she said.

"I don't get it," Mayberry said.

Rep. Gayla McKenzie, R-Gravette, made a motion for the House committee to recommend approval of the bill. Chairman Joe Jett, R-Success, ruled that the motion failed in a voice vote. But no committee members could be heard voting for or against the bill in the voice vote.

Metro on 03/20/2019

Print Headline: Panel likes used car tax exemption bill


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Archived Comments

  • hogfan2012
    March 20, 2019 at 11:19 a.m.

    Raising the used car tax threshold is a great idea. It is very hard to find dependable road-worthy vehicles under $4,000. The increase to $7,500 is a move in the right direction. I am actually opposed to any tax on used cars as this is definitely double/triple taxation. You pay on the new car when it is bought and pay personal property tax every year it is owned - then it is taxed when it is sold to the new owner. Thank you, Bill Clinton for this travesty. As noted above, when an auto is purchased - an individual has to purchase insurance coverage, pay licensing fees and likely make a down payment. This can cause a hardship on everyone, but especially the citizens who can only afford an older used car.