A three-day window in the legislative session that saw lawmakers, industry stakeholders and the governor’s office come to the table for a compromise plan led to the $300 million highway proposal that successfully emerged from the recently-completed 92nd General Assembly.
Arkansas Trucking Association President and CEO Shannon Newton, who appeared on this week’s edition of Talk Business & Politics, said that an early February press conference was the tipping point for a consensus.
“You had the legislative proposal, you had the governor’s proposal, and you had the stakeholders’ proposal. And it was somewhat of a Venn diagram of, this is how far we’re willing to go and this is what we’ve got to have to call it a success,” she said. “I really think when we stood at the podium and the Governor was there and Speaker [Matthew] Shepherd was there and Senator [Jim] Hendren and you felt like everybody was going to support this plan. I think at that point I felt like we were over the hill.”
Arkansas State Chamber of Commerce/Associated Industries of Arkansas President and CEO Randy Zook, who also appeared on the roundtable discussion, agreed and added that public opinion on the condition of the state’s roads was also a catalyst.
“It’s just public opinion,” he said. “Look, the experience with the highways, that’s the most compelling way to sell the need for highway funding is just to let people drive on the roads for a while. We all recognized that we’ve got roads that are in deteriorating condition and bridges that just have to be replaced that are weight-restricted or even marginally safe, so we’ve got work to do.”
The highway plan that emerged from the Republican-heavy legislature and was supported by Gov. Asa Hutchinson will raise roughly $300 million annually at the state level through an increase of gas and diesel fuel taxes, miscellaneous state revenues, new fees on hybrid and electric vehicles, and a permanent half-cent sales tax which must be approved by voters in 2020.
Zook said it is crucial that Arkansans make permanent the half-cent sales tax for roads currently set to expire in 2022. It will raise about $200 million of the $300 million needed.
“Basically, we’ve made a one-foot jump on a three-foot ditch so far. So we’ve got two more feet to go,” Zook said. “I think the people are going to be responsive. I mean, they passed it with a strong margin originally and I think people are used to paying it. It’s not an increase, it’s a continuation. So people have seen the benefits of what they invested in or agreed to pay for with the tax through the road improvements that we’ve had and more to come, more that’s already funded.”
If the tax extension doesn’t pass in 2020, Newton said our highway problem will remain.
“We would have a highway funding problem again if it didn’t pass. You know, Randy alluded to the substantial portion of the plan is the half-cent continuation, but I think based on the research that we’ve done, based on the results that the people have seen from the current half-cent, and the way that it’s set up to continue to feed back into the cities and counties so that people can see results back home, there’s no one that’s going to be left out,” Newton said.
A map of how the highway funding could impact communities could be unveiled “no later than the fall,” Newton suggested. Input will be needed from the Highway Commission, the governor, cities and counties, industry stakeholders and citizens.
“We’ve had those conversations, and I know that they [Highway Commission] are working on it now,” she said. “I think the campaign for the half-cent probably will kick off sometime a year out from the election.”
Zook and Newton also discussed a variety of tax issues that were dealt with in the session.
Zook said that lowering Arkansas’ top personal income tax rate to 5.9% and lowering the corporate income tax – both achieved in this session – would put the state in a better position regionally for business.
“Clearly, Arkansas has been classified over the last several years as a relatively high tax state compared to our neighboring states,” he said.
“We’ve been out of step, not only with our state and local sales taxes, where we’re pretty high still, but also especially so with our income taxes. We’ve been higher than competing states. So the governor recognized the need early – before he was even originally elected governor – he recognized the need to make some moves in this area and he’s taken us in three bites,” Zook added, in reference to tax cuts approved in previous sessions.
Newton said with many of her members having pass-through business entities or being C-corporations, the tax reform from this session will help improve their bottom lines and investments in the future.
“The individual income tax rate coming down actually helps small business and medium-sized business in Arkansas. I know we went to our members – of course we were involved in the efforts on the corporate tax reform and the big public, C-Corp. certainly, that was important to them – but many of the small-, medium-sized trucking companies that are members of ours benefited from the individual income tax cut because they file as LLCs or pass-throughs,” she said.
Zook also said that passing a law that requires collection of sales and use taxes on online retail purchases will level the playing field with Main Street brick-and-mortar retail operations. He said there will be other local benefits from the new tax law, too.
“Number one, it’s going to increase state sales tax revenue because sales tax that is due and oweable from Internet, out-of-state providers will indeed be collected and remitted to the state. Right now, if you don’t have a physical nexus in the state, like a store or a warehouse, you can avoid the tax. But the person who made the purchase still owes the tax under the 1949 Use Tax law,” he said.
Newton and Zook said work remains to address workers comp and workforce development issues. And tort reform, which was stricken from the ballot in 2018 and did not advance as a legislative-referred proposal for 2020, is also a topic of concern in the interim, although action may not occur anytime soon.
You can watch their full interview in the video below.