Legislative support is coalescing around a popular bill to exempt all retirement benefits of military veterans, but rising opposition to the legislation backed by Gov. Asa Hutchinson is putting some lawmakers in uneasy positions to fund the widely-sponsored measure.
On Wednesday, at a press event held at the rotunda at the State Capitol, several lawmakers from both chambers of the 91st General Assembly gathered to publicly back the military tax exemption before a large group of Arkansas veterans.
Rep. Trevor Drown, R-Dover, told a crowd of enthusiastic supporters that the bill would make Arkansas more competitive with surrounding states that offer such tax breaks, allow the state to attract military veterans with strong work ethic, and bring experienced workers with unique and varied skill sets into the state’s labor pool.
“Today, with efforts of the (lawmakers) standing behind me and the governor, we can put ourselves on a level playing field, and the basic training and things we see in Arkansas that are lacking in skills will hopefully be attracted to our state and will encourage industries into our state because we have an avenue for that talent,” said Drown, a former enlisted officer in the U.S. Army’s 20th Special Forces Group.
Sen. Trent Garner, R-El Dorado, also a military veteran, said he was passionate about the governor’s proposal for many reasons, including the fact that he grew up in a military family. He said his father, an enlisted officer in the National Guard, would retire from service this year and would benefit from such legislation.
“I am here today to show my full support,” said Garner, who served two tours of duty in Afghanistan also with the U.S. Army’s Special Forces’ Green Berets unit.
Sen. Jane English, R-North Little Rock, and Rep. Charlene Fite, R-Van Buren, also spoke in favor of the legislation roll back on all retirement pay for veterans and their surviving spouses from the state’s current 6% state income tax rate.
English has already filed Senate Bill (SB 13) in support of the governor’s proposal, while Fite has filed legislation in the lower chamber for the second straight session. Fite said it would be an incentive for service personnel to move to the state and retire.
“This is something that I wanted to do since I came into the House of Representatives,” said Fite, sponsor of House Bill (HB) 1003.
Today, state law exempts the first $6,000 of veterans’ retirement incomes from state income tax considerations. Since 2009, similar bills have been filed during the general session, but none of those proposals have received the full support of the legislature, former Gov. Mike Beebe, or Hutchinson in the 2015 session.
However, in announcing his $50.5 million tax cut plan in early December, Gov. Hutchinson said he would back legislation and outlined a proposal that he said would cut state general revenues by $13 million.
To pay for the tax cut to military veterans, the governor’s proposal would remove the exclusion from income on unemployment benefits, which he said would create $3.1 million in additional generation revenue. The plan also calls for applying the sales tax on the full cost of manufactured housing and candy and soft drinks, which would raise an extra $2.4 million and $13.8 million, respectively.
J.D. Harper, executive director of the Arkansas Manufacturing Housing Association, said his group would oppose the governor’s proposal to hike the sales tax on manufactured housing. He said Arkansas taxes on manufactured housing is already the highest in the region, explaining that taxes on a $65,000 trailer are about the same as a newly constructed house costing twice that much.
“No Blue Ribbon Commission ever created will help our customers be able to afford a home of their own – or explain to them how paying $1,800 more tax on the average home sale is not a tax increase,” said Harper, who stood alone at the rotunda press conference.
Harper said he has talked with the Hutchinson administration and lawmakers on looking for other ways to pay for the tax break, but acknowledged that support for the plan is very strong in both the House and Senate.
Retired U.S. Air Force Colonel Don Berry, who represents the central Arkansas chapter of the Military Officers Association of America, said the time was right to pass such legislation given the governor’s support and several failed attempts in the past of similar bills.
“Some of the initiatives in the earlier years had a phased-in approach, but this (bill) implements a 100% tax exemption,” Berry said. “If you are going to attract military retirees, there are 6,000 Arkansans on active duty and 100 of them are stationed here. To get them to come home, we have to give them a better deal than our neighboring states.”
Earlier in the day at a Senate panel meeting, Sen. Jake Files, R-Fort Smith, said lawmakers are now having talks on how to pay for the governor’s tax cut proposal, including the tax exemption for military veterans.
“There are discussions now with members getting comfortable with where we are (financially) and what the bills say,” he said. “I think there is some communication back and forth together … on the $50 million tax cut and the veterans’ bill, particularly as it relates to manufactured housing and some of the other nuances in that bill.”