Legislators hope to exempt Arkansas income taxes for military veterans

The last time the Arkansas General Assembly convened a law to exempt military veterans retirement benefits from state income taxes was nixed by Gov. Asa Hutchinson.

Gov. Hutchinson already had a $102 million tax cut plan he wanted passed, and the veterans’ exemption would have cost the state too much on top of the other cuts, it was argued at the time.

At least 500,000 taxpayers received some form of state income tax relief as a result of the bill passed. It was lauded as the largest tax cut in Arkansas’ history, but Rep. Scott Baltz, D-Pocahontas, told Talk Business & Politics he thinks more needs to be done.

He plans to introduce two bills in January to exempt military veterans retirement benefits from state income taxes if he wins re-election this November. One plan will exempt veterans’ incomes up to $24,000 per year, while the other bill will exempt their incomes up to $40,000 per year. Rep. James Ratliff, D-Imboden, will co-sponsor the legislation if he’s re-elected.

“The state needs to be more veteran friendly,” Baltz said. “I need people to get out and tell their representatives and senators how important this is to them.”

Hutchinson has said if he will support the proposal.

“I intend to announce my income-tax plan closer to the start of the legislative session. As we approach that point, I do expect more legislators to introduce their proposals,” Hutchinson said. “We will continue to evaluate these ideas as we near the start of the session.”

State law exempts the first $6,000 of veterans’ retirement incomes from state income tax considerations. If the $24,000 exemption is passed, it will cut into state revenues about $8 million per year, starting in 2020, according to the state. If the $40,000 exemption is passed, the cut will cost $16 million per year, also starting in 2020.

It only applies to veterans who have retired from one of the military services. Baltz estimates there are about 24,000 retired vets in Arkansas that could be affected by this legislation. It also applies to anyone who receives survivor benefits.

Baltz doesn’t think the tax cut will hurt overall state tax revenues. The tax cut would mean the vets would have more disposable income, and it will end up spurring local sales tax coffers, he said. It could put hundreds of dollars back in the hands of vets each year, he said.

Arkansas is one of the few states in the region that does not offer income tax exemptions at these income levels to veterans. Baltz was recently in Mammoth Spring discussing the issue with a veterans group. Five veteran attendees don’t live in Arkansas, but might consider a move here if one of these bills is passed, Baltz said.

“These veterans have fought for us, and we really need to fight for them,” Baltz said.

Baltz is a two-term legislator from House District 61. His district includes a populated swath of Randolph County that includes the county seat, Pocahontas. The district includes a small salient of northern Sharp County, and most of Fulton County, including its county seat, Salem. He is opposed by Marsh Davis, R-Cherokee Village, and Chris Olson, L-Viola.