The state’s economic chief says if there are further cuts beyond Gov. Mike Beebe’s grocery tax reduction, they should be focused on targeted pro-business efforts and not undermine current economic incentive programs.
Arkansas Economic Development Commission Director Grant Tennille tells Talk Business that his recent comments regarding a tax break for industry re-investing in Arkansas should be debated as an alternative to a goal of broader corporate or individual income tax reduction.
“If some members of the legislature are looking at tax policy changes that could be made to improve the business climate in the state of Arkansas, their focus so far has been on the income tax, both corporate and personal. My message has been if you’re going to look, let’s look at some taxes that may be a) more affordable and b) may have a bigger impact on business,” he said.
Some Republican legislators are advocating for reductions, restructuring or the elimination of the corporate and individual income tax structure in Arkansas.
Tennille has discussed with lawmakers reducing or eliminating the sales tax on parts and equipment for manufacturers reinvesting in their Arkansas assets, which has been cited by some businesses as a reason to make plant investments in other states. The potential economic impact of that tax cut is estimated at roughly $40 million annually.
Tennille said in his five years of working on economic development projects in the Beebe administration, Arkansas’ broader income tax structure has never been mentioned as a reason to not locate in Arkansas. The re-investment sales tax treatment has been raised.
“We have had companies tell us we’re not locating in Arkansas because we don’t believe you have the workforce to do the jobs we need to do, and we have had companies say we’re not going to locate in Arkansas because you lack the infrastructure we need to be effective,” Tennille explained.
“Before we make big changes to the tax structure in Arkansas and have a huge impact on the Treasury, we need to think about the effect we’re going to have on the Quick Action Closing Fund and other incentives we make available to companies,” he added.
Tennille said he fully supports the Governor’s effort to complete his repeal of the grocery tax, which has been whittled down from 6% to 1.5% during Beebe’s tenure.
“This administration’s first priority tax-wise is the final elimination of the grocery tax,” Tennille said. “It is the most broad-based tax cut we can provide to the people of Arkansas. It’s the fairest. Obviously, I support the Governor in that effort.”
Tennille said there are a lot of potential projects sitting on hold. He anticipated that the outcome of the November Presidential election — regardless of who wins — would likely unclog many projects in limbo.
He also said that some fruits of the Governor’s trip to China this year may soon yield results.
“Without getting too specific about the China trip, I will say that we have a number of companies that have scheduled visits, who will be here in the state in the next couple of months hopefully ready to take that next step,” said Tennille.