House Revenue & Tax chair debriefs tax reform discussions

Rep. Joe Jett, R-Success, said trigger mechanisms for tax relief are the biggest hurdle to overcome in finding a road map for cuts that could lead to a special session.

Gov. Asa Hutchinson and state lawmakers are discussing a reduction of the top individual income tax rate from 5.9% to 5.5% or lower, a low-income tax credit, eliminating a low-income tax bracket, and a possible corporate tax cut.

Appearing on this Sunday’s Talk Business & Politics, Jett, who chairs the House Revenue & Tax committee, said legislative leadership and the governor will meet again this week to find a compromise.

“The disagreement, if you will, will be on the trigger mechanisms,” he said. “We all agree in principle, to everything I just mentioned, but when we start getting into the trigger mechanism, then you get into like unlawful delegation once one General Assembly binds another General Assembly – that’s against our Constitution.”

Jett said he also wants to make sure the state can fund a deep tax cut with ongoing revenues, amidst a $1 billion surplus and federal stimulus funds that have buoyed Arkansas’ finances.

“I know it seems like to a lot of people out in the public right now that that we’re dragging our feet or whatever, but I can assure we’re working hard behind the scenes. This is such a huge, aggressive tax cut. The leadership wants to get this thing right. The governor wants to get this thing right. So we’re not rushing this thing,” Jett said.

The revenue and tax chairman said there is interest in reducing the corporate tax rate. One proposal would be to stagger the corporate tax reduction a biennium behind any reduction to the top individual income tax rate.

“That’s one of the things we haven’t polled the members yet. I know I spoke with a Speaker today, obviously several times, but it’s one of the things we’re going to come back next week and we’re going to present it to the House members to kind of get a feel for what the corporate tax cut could be,” he said.

Jett also voiced his opposition to a proposal floated by Attorney General Leslie Rutledge to eliminate the individual income tax in Arkansas by 2030. Rutledge, a GOP candidate for governor, has proposed a possible constitutional amendment to put the elimination into effect.

Jett said the biggest threat to eliminating the individual income tax too quickly would be undermining essential government services, such as public schools, prisons and Medicaid.

Not only would the state lose about $3.3 billion of its $6.8 billion general revenue budget, but it would also miss out on matching federal dollars for everything from highways to Medicaid to education funding.

“If it is a one-for-one [federal] match, if you take that $3 billion out, essentially that turns into $11 billion. We’re cutting half of what it takes for us to operate in the state,” he said. “I would say the question would be: Do you want to consolidate schools? Do you want to stop turnback money to cities and counties? Do you want the Medicaid and nursing homes, and hospitals closed down? That’s going to go away, as we know it. There are hundreds, if not thousands, of questions that we need to be asking ourselves: Is this the right policy?”

You can watch Jett’s full interview in the video below.