The Senate Revenue and Tax Committee moved swiftly Thursday morning on a dozen tax reform measures totaling more than $170 million in breaks for businesses, industry and individuals in Arkansas.
With a deal on the table to resolve the “private option,” the dam seemed to break for tax cutting legislation.
For starters, the tax panel approved Gov. Mike Beebe’s grocery tax reduction measure, which would not go into effect unless revenue tied to desegregation funding was triggered. The bill, SB 135, would impact state revenues by $70 million over the biennium if the triggers kick in.
Other bills approved by the committee included:
• SB 299, a sales tax break for timber harvesting equipment. Annual impact approximately $705,000.
• SB 298, a sales tax break on utilities for grain dryers. Annual impact approximately $3.8 million.
• SB 11, a sales tax exemption supplies for farm machinery. Annual impact approximately $1.1 million.
• SB 853, a sales tax break for dental appliances. Annual impact approximately $2.1 million.
• HB 1039, a utility sales tax break for agricultural structures, aquaculture and horticulture. Annual impact approximately $10 million.
• SB 791, a utility sales tax reduction for manufacturers. Annual impact approximately $17 million.
• SB 334, a sales tax break for replacement parts and machinery for manufacturers. Annual impact approximately $6.9 million.
• SB463, an income tax break for active duty military. Annual impact approximately $7.2 million.
House Speaker Davy Carter’s, R-Cabot, bill to broaden the capital gains tax exemption was amended. Instead of raising the threshold from 30% to 70%, the amended bill, HB 1966, would raise the capital gains tax threshold to 50% of gains. There is an exemption for capital gains that exceed $10 million. Department of Finance and Administration officials estimated the revenue impact to be approximately $18.1 million annually.
Rep. Charlie Collins, R-Fayetteville, the House Revenue and Tax chairman, also amended his income tax bracket reform measure, HB 1585. Previously, the bill rearranged a middle income tax bracket for those making between $33,000 and $44,000 annually, and it sliced the top tax bracket of 7% to 6 and 7/8th%.
Collins amended bill eliminated all of those changes and cut one-tenth of a percent of all tax brackets that currently exist. The lowest income tax bracket would be the only category to receive the break in year one.
The estimates on annual revenue impact to the state for the bill now would be $2.5 million in year one, $30.4 million in year two, and $55.7 million in year three. There were dissenting votes by Democratic Senators on the panel on the income tax reform bill pushed by Collins.
Nearly every bill was amended to make the full effects of the tax cutting measures start in fiscal year 2015 in order to capitalize on the projected revenue savings from the “private option” health insurance bill.
As the committee closed, Sen. Bart Hester, R-Bentonville, chided the panel for doing too much for one business – Big River Steel – and too much for Senators’ general improvement funds (GIF). Hester said the $125 million for Big River and the $100 million for GIF money for legislators were misplaced priorities.
“We’re going to cut $9 million worth of taxes next year for the Arkansas taxpayers when we as Revenue and Tax just said that cutting taxes for businesses helps create jobs,” Hester said. “We’re going to give $125 million for one company and then as a legislature for GIF, earmarked, pork barrel spending, we’re going to give away a $100 million for us to take home and use for our personal choices. It’s wrong and I’m not going to stand for it.”
The full State Senate passed all of the measures in a late afternoon session.