The Arkansas House Revenue and Taxation Committee late Thursday afternoon advanced a bill that would implement Gov. Asa Hutchinson's plan to reduce the sales tax charge on used vehicles, trailers and semitrailers priced between $4,000 and $10,000 from 6.5% to 3.5%.
The committee recommended the House approve House Bill 1912 by committee Chairman Joe Jett, R-Success, though the House on Monday voted 97-0 to send the Senate a competing bill sponsored by Rep. John Payton, R-Wilburn, that would gradually increase the price of used motor vehicles exempt from the sale tax from $4,000 to $10,000.
HB1912 is projected by the state Department of Finance and Administration to reduce state sales tax revenue by $6.5 million in fiscal 2022, which begins July 1, and $13.1 million in fiscal 2023. The bill would become effective Jan. 1, 2022.
Jett told the House tax committee that he supports House Bill 1160 by Payton, which would exempt from the sales tax used motor vehicles with a purchase price of less than $7,500, up from the $4,000 threshold, starting Sept. 1.
That exemption level would increase to less than $10,000 two years later under the bill. The finance department projected Payton's bill would reduce revenue by $9.5 million in fiscal 2022, gradually increasing to $28.4 million in fiscal 2025.
"The problem we have here now is [Payton's bill] is held up in the Senate," Jett said. "Right now, we don't know if we are going to get out of the Senate, so [HB1912] is a fall back."
"If the Senate holds up Rep. Payton's [bill] any at all, we could actually gavel out without a car tax plan for the people of Arkansas," he said. Legislative leaders aim to recess the session by April 30.
The revenue committee also recommended House approval of a bill that would extend an income tax credit for steel manufacturers that purchase certain waste reduction, reuse and recycling equipment.
Senate Bill 543, by Sen. David Wallace, R-Leachville, would allow for recycling tax credits to be calculated at 30% of the expense of the eligible equipment for qualifying projects. The project must have a total investment of more than $250 million and create at least 150 new jobs with an average annual wage of $75,000 a year.
Wallace said his bill aims to assist Big River Steel in Mississippi County.
The income tax credit is available under current law to qualified steel specialty products manufacturing facilities that started construction on or after Jan. 1, 2017, with a closing date before July 1, 2018, the finance department said.
SB543 would extend the credit to such facilities that start construction on or after Jan. 1, 2021, with a closing date before July 1, 2023.
The committee also recommended House approval of House Bill 1719 by Rep. Robin Lundstrum, R-Elm Springs, which would create the Reboot Pilot Program. The bill would provide refundable income tax credits for employers who hire former felony offenders who were incarcerated and released from a first term for an offense within 12 months of hiring, according to the finance department.
The former offender must be employed at least 40 hours per week at pay at or above the state's minimum wage under the bill. The income tax credit would be $3,000 upon completion of a year of employment, $2,000 upon completion of two years' employment and $1,000 upon completion of 3 years' employment, according to the finance department.
Lundstrum said the pilot program would be limited to 1,000 former offenders. The bill would become effective starting in tax year 2022 and cost the state roughly $3 million in general revenue, starting in fiscal 2023, said Paul Gehring, an assistant revenue commissioner for the finance department.
The committee also endorsed House Bill 1456 by Rep. Jeff Wardlaw, R-Hermitage, that would create an income tax credit based upon the expenditures of an eligible railroad company for track maintenance and modernization.
The credit would be equal to 50% of the eligible taxpayer's railroad track maintenance expenditures, the finance department said. The maximum amount of the credit is $5,000 per mile of track owned or leased by the railroad.
The bill would be effective for tax years starting on or after Jan. 1, 2021. The finance department projects it would reduce general revenue by up to $4.9 million in fiscal 2022.
On the other side of the state Capitol, the Arkansas Senate on Thursday approved Senate Bill 181 by Sen. Trent Garner, R-El Dorado, which would expand the sales-tax holiday to include electronic devices, effective July 1. State law provides a sales-tax holiday for purchases of clothing, clothing accessories or equipment, school art supplies, school instructional materials and school supplies. The revenue impact of the bill would be $1.95 million in fiscal 2022.
The Senate also approved Senate Bill 244 by Sen. Kim Hammer, R-Benton, that would expand the current sales-tax exemption for instructional materials to include the electronic equipment required to make use of technology-based educational materials and electronic software, effective July 1, 2021. The revenue impact is estimated at $4.5 million a year.