House panel OK’s raising threshold on used car sales tax to $7,500; rejects bill to pay for disability program

A House committee on Tuesday (March 19) strongly backed a proposal to raise the threshold to pay sales taxes on used car purchases, but rejected a bill to eliminate a tax break for gamblers that would shift those revenues to a program to provide greater services for people with developmental disabilities.

The bill, House Bill 1653, received a lukewarm reception on the agenda on the House Revenue and Taxation Committee after sponsor Rep. Julie Mayberry, R-Hensley, reminded committee members they already approved a sister bill by a unanimous vote of 91-0 on the House floor three weeks ago.

That companion legislation, HB 1491, by Rep. Josh Miller, R-Heber Springs, now sits in the Senate Public Health, Welfare and Labor Committee. It calls for the state Department of Human Services (DHS) to set a three-year deadline to provide community-based services to the state’s waiting list of 3,137 developmentally disabled Arkansans now in the state’s Alternative Community Services Waiver (ACS) program, also known as the “Developmental Disabilities Waiver.”

“What (HB1491) did was said we would eliminate this developmental disabilities waiver list within three years, which is wonderful to say … ” said Mayberry, adding “but there is no funding with that. Money doesn’t grow on trees.”

Mayberry further explained that under HB 1653, the state would create a new revenue stream for the ACS waiver program by eliminating the current income tax deduction for gambling losses and shift that $11 million in revenue to reduce the waiting list by up to 800 people. In addition, the Benton representative said that a 30-70 federal funding match with the new state revenues would increase the program’s annual take by another $25 million.

IT’S A GAMBLE
“So, we put in $11 million and the federal government puts in $25 million and we have now made $36 million to help the families that you see here with me today,” testified Mayberry to a standing-room only crowd. “They don’t have a choice to have a disability or not. Those who don’t want to gamble have a choice, and that is exactly what gambling is – it is a gamble.”

Little Rock native Mark George, who testified on behalf of HB 1653, later told the committee that the state could face a lawsuit if it does not find a remedy soon for state funding to help people with disabilities move from institutionalized care to community-based services.

In 2003, George and his daughter Tessa, who has Down’s Syndrome, won a landmark case in 2003 against DHS when the state’s wait list was at zero. Under the waiver program today, persons with disabilities may receive additional services such as case management, support living assistance, non-medical transportation, adaptive equipment and crisis intervention help through the state division of Developmental Disabilities Services’ DDS’ licensed community providers.

“This makes fiscal sense to do this, if this is what you care about the most. But I am hoping that we as a legislative body care more about the human factor in this,” said Mayberry, who fought back tears describing her own personal experience with a child born with spina bifida.

Following testimony by Mayberry and George, Melissa Stone, director of the state Division of Developmental Disabilities Services, also told the panel that state’s waiting list will never be fully eliminated because of the continuing needs for services for persons with developmental disabilities.

During the 2017 session, lawmakers approved a bill backed by Gov. Asa Hutchinson that allowed the state to take $8.5 million from the Arkansas Tobacco Settlement fund to use as matching funds to receive additional federal dollars of over $21 million. DHS used those funds to reduce the waiting list of more than 3,000 developmentally disabled Arkansans seeking in-home care by more than 500.

“But we will always have people who need assistance and who will be applying for the waiver wait list,” Stone told the House panel.

In questions to Mayberry and Stone, Rep. Robin Lundstrum, R-Elm Springs, said she was uncomfortable with taking a tax deduction for gambling and using it to pay for the social program. She said she was concerned that Arkansas would lose new revenue coming into the state after voters approved a constitutional amendment in November allowing four casinos to operate in Arkansas.

“This situation of moving or eliminating the gambling (deduction), it seems counterintuitive to me,” said Lundstrum. “We want people to come into (Arkansas) to gamble. So if we take their gambling winnings, that kind of seems like we are hurting their situation.”

After several minutes of back-and-forth with Mayberry, the House panel heard brief, but emotion-filled speeches from two parents who described their experience of having developmentally disabled children on the state’s waiting list for several years.

Despite those riveting testimonies and comments by several lawmakers that the state needed to find permanent funding for the waiver program, the committee fell silent when a voice vote was called for a do-pass recommendation on HB 1653. After receiving no yea or nay votes, the bill died in committee with several lawmakers meeting after the House hearing to privately discuss funding alternatives for the waiver program.

USED CARS ARE FOREVER
Later during the committee hearing, Rep. John Payton, R-Wilburn, won unanimous approval for a bill that top Department of Finance and Administration (DFA) officials said would drain more than $12 million from state budget coffers.

House Bill 1342, which has strong bipartisan support with 82 House sponsors and 10 Senate backers, would increase the sales and use tax threshold that Arkansas taxpayers would have to pay from $4,000 to $7,500 when purchasing a used vehicle across the state.

“I think most people are familiar with (HB 1342) because we have most everybody on there as a co-sponsor,” Payton said jokingly when introducing his bill. “I have been here a little over six years and many of my colleagues have asked me why we tax used cars.”

Payton, a car dealer, testified that the average used car in Arkansas goes through up to five or six owners before it reaches the $7,500 price threshold. He said DFA now collects taxes on a used car each time it is sold until it reaches the $4,000 level.