Members of the Arkansas House Committee on Revenue and Taxation “understand that our focus is individual income tax cuts overall,” according to Rep. Les Eaves, the Republican from Searcy who chairs the committee.
Speaking at this week’s legislative update at the Searcy Regional Chamber of Commerce on Monday, Eaves said cutting income tax is the primary goal since new Gov. Sarah Huckabee Sanders has stated “many times” that it is one of her priorities.
“I would also like to see at some point us trying to reduce the corporate tax rates as well,” Eaves said. “I don’t know if we’ll get it done this session but that would be a priority in the future.”
Sen. Jonathan Dismang (R-Beebe), co-chairman of the Joint Budget Committee, said he has “started drafting I think what will be a version of the income tax cut, if we have agreement on that.”
However, he said a balanced budget had not been presented yet by the Sanders administration “and I’m not sure I expect to see one at this point, and I think personally I’m probably ready to move forward with RSA (Revenue Stabilization Act). ... We’re still waiting on the governor’s letters on personnel which means we can’t finish drafting the remainder of the budget bills. We pushed every one of those out that we could early on ... and now we’re waiting on the executive.”
Eaves said his committee already has received around $1.4 billion to $1.5 billion requests, but it is “still waiting on the balanced budget to see how much we can spend, whether it’s on tax cuts and how much criminal justice is going to cost us.”
“We’re starting to get a little pressure from members to start hearing some of those bills, which could be problematic to some degree if we still think we want to do a good criminal justice reform package and also tax cuts,” he said. “So I’m trying to hold them off as long as we can, but they’re going to press us to start hearing those bills soon.”
The committee, which also includes Rep. Jim Wooten (R-Beebe) was scheduled to meet Tuesday morning.
Dismang said that in “every session since I’ve been here we have $2 billion worth of proposed tax cuts ... but the way that it’ll work is as we get closer to the end of the session, we have a more concrete idea of what the spending priorities are and what the forecast is. Then, we will determine an amount that can be cut in taxes essentially and there’ll be a conference between the House and Senate and we’ll prioritize the tax cuts from there.
“This time, I think the vast majority of that tax cut amount will get eaten up by income tax and then there will be some other smaller provisions that will also make it into the list. I would anticipate that in this session most of what is left will be what’s considered income driving. What I mean by that is bringing new industry or business into the state.”
Eaves said not all of the tax cuts in his committee “are going to come out. That’s the challenge with leadership ... to try to hold members off a little bit and help them understand that any sort of legislation that gets out of those committees is over time at least income producing to the state.”
“There are bills in there would exempt firefighters from paying income tax, or policemen or daycare workers or whatever, but it’s hard to continue to exempt individual groups when if we can kind of focus on the overall income tax rate those same groups will get that same benefit over time,” he said.
Some of the bills, Eaves explained, “are $200 and $300 million cuts. There are others that are real small cuts like $10,000, $50,000, $150,000, stuff like that.” There are other bills, he said, that when you get a “fiscal impact statement from the Department of Finance, it’s hard to figure out how they come up with the number. It gets a little bit strange.”
While cutting the individual income tax rate is the primary goal, Eaves said, it is followed followed by bills that try to “have a good economic impact on the state that lead us into a better position economically and bring more money and more people into the state.”
“I don’t think there’s an appetite [among the committee members] to single out one group for special exemption,” he said. “... At the end of the day, we just know how much money we can spend. Like Sen. Dismang said, we can’t deficit spend, so that’s where leadership comes in, you have to be able to sit down with members and kind of come up with some idea of what you can spend.”
He said the requests this year are not uncommon, but this year has been different for him not only because he is chairing the Revenue and Tax Committee, but because “in the years past, the Revenue and Tax Committee was kind of the committee that drove the conversation from the early on. Big, huge income tax cuts were the primary focus like when Speaker Jeremy Gillam was our speaker twice. We did middle income tax cuts, we did low income and then we did the higher-income bracket, so those were kind of for the most part what led us in session. So you did that early on and we’re kind of backwards now. Everything is just kind of treading water a little bit and then we’ll see where we come out.”
Dismang said the state could actually cut income tax this fiscal year retroactively easier than “we’re going to be able to do in year three. It’s year three is when more of those items [being passed this year] hit [the budget]. So if you think about parole reform, it doesn’t have an impact in year one or two. It does on the accumulation, which starts to hit in year three. ... It’s year three when things get expensive, and that’s where the trick is, where the formula is to try to make sure we don’t cut taxes, our revenue, in such a way that we do have an impact on the expenditures in year three, especially those that we would consider priority A.”
He said what prison reform will cost is “pretty astounding. The debate is right now how many of those items can we include ... and I don’t think anybody knows the answer yet.
Rep. Jim Wooten (R-Beebe) said it’s going to be “high dollar.”
With “parole reform and all that, it’s going to be interesting to see how they propose – they being the administration – what they want to do and then what our membership wants to do about it,” Wooten said. “We’ve got to do something. We’re leaving the burden on the counties and the county jails. We need 1,500 new beds as quick as we can get them plus the 500 that we approved last time. That’s 2,000, which is roughly what we have backed up in the county jails – right now we’re at 2,220 -2,300 I think.
“We’re either going to really have to increase the amount we’re paying counties or we’re going to have to build more beds. and the population I think is growing about 1 to 1 1/2 percent a year so we’ve got to address it.”
Dismang said, “Violent repeat offenders, when you say, ‘What’s the priority?’ I think that’s what you’re looking at. That’s a pretty hefty list when you put it all on paper.”
He said there are some additional beds that are open “but you’ve got to be able to staff them.” He said one of the things that is going on now is that an evaluation is being done on all the prisons to see what is available, “because there are open beds or beds that could be created. Again, the problem is if you had the staff in place you could probably do it but what’s it going to take to staff them up?”
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