Sen. Files: Tax reform focus of Legislative leaders

Tax reform was the topic of discussion at the First Friday breakfast at the University of Arkansas at Fort Smith.

At the event, hosted by the Fort Smith Regional Chamber of Commerce, Sen. Jake Files, R-Fort Smith, was the keynote speaker and spoke on the topic of tax reform. Files chairs the Senate Revenue and Tax Committee.

Files said the first Republican-controlled Arkansas legislature in more than 100 years was anxious to see a reform of the tax code.

"There is a great divide between the administration (of Democratic Gov. Mike Beebe) and house Republicans," he said.

According to Files, the proposed balanced budget presented to lawmakers by Beebe had no tax reforms, something Speaker of the House Davy Carter would like to change.

"The Speaker came and said to the (Revenue and Tax Committee) that he thought we could do a $150 million (tax cut)," he said.

Any proposed tax cuts would not cut spending at state agencies or universities, Files added.

"We have surplus money and that's where we're talking about cuts."

SB 334, one of the Senate bills that would reform part of the tax code, was highlighted by Files on Friday. The bill, he said, would make repair and replacement parts tax free, encouraging companies to locate in Arkansas versus locating in a neighboring state that already has a similar tax structure in place.

George Moschner, an executive vice president at Baldor Electric Company, addressed the assembled members of the business community to discuss specifically how the proposal would impact his business and others across the state.

"At Baldor, we spend between $5 million and $6 million on repair parts each year," he said. "(This would provide) $350,000 in savings. That's real money."

According to Moschner, without passage of SB 334, Baldor and other businesses will lose business that could not only come to them, but also to the state of Arkansas.

"A reduced cost structure going forward helps us compete," he said. "If another state doesn't have that structure, it puts us at a disadvantage. This would have a significant impact on Baldor and other businesses, as well."

SB 334 is just one part of a tax reform package many members of the house and senate are attempting to push through this session, Files said.

"We have $2 billion in tax cut bills," he said, adding that many of the tax cut proposals are doomed to fail. "It's 40% of our revenue."

One proposal Files said is moving in the House is a reduction in personal income taxes. He said such a reduction would also make Arkansas more competitive with other neighboring states, such as Texas, which do not have personal income taxes. Files said the top income tax bracket in Arkansas tops out at 7%, and he said it does not take much income to be pushed into that top bracket.

"A first year teacher is in the top tax bracket," Files said. "I don't think that's right."

Even though Files and other Republican legislators are seeking ways to reduce taxes, not all of it will be directly related to income taxes. Files said much of it will focus on individuals and businesses who can reinvest the money saved through tax cuts in projects, such as capital improvements and expanding the workforce.

"It's as equally as important as putting money in people's pocket," he said.

Without a reform of the current tax policy, Files said businesses and individuals who work at those businesses will stand to lose the most when it comes to continued growth.

"Tax policy plays a big role in incentivizing business and bring new business in."