By JOHN HOFHEIMER
Leader senior staff writer
With the governor’s $50 million state income tax break for low-income Arkansans now law and a hefty state income-tax exemption for military retirees set for signature Tuesday, voters may feel like this 91st General Assembly is all about tax cuts.
But contained within those cuts are increases, including taxes on downloads of books and music, increases in candy and soft-drink sales tax, and a separate piece of legislation would require sellers of online commodities such as clothes, tools and other goods to tax the purchase and remit those revenues to the state general fund.
ALSO IN THE MIX
Also in the mix are an extension of gun rights onto college campuses, further restrictions on abortion rights and a voter-ID law, and in the future—perhaps a special session—more infrastructure for the new medical marijuana law.
Speaking of infrastructure, no new revenues appear on the horizon this session to help rebuild decaying roads and bridges.
Senate President Pro Tempore Jonathan Dismang (R-Beebe) said that the focus would soon shift to the budget, particularly in light of a $56 million decline in state revenues.
He expects further review of telemedicine, initiation of online sales tax and constitutional amendments.
OBAMACARE FUNDING
He doesn’t expect much discussion or action on the state’s version of the Affordable Care Act this session.
“I think Speaker (Paul) Ryan says the House will start working on a replacement for the Affordable Care Act in March,” Dismang said. “We’ll have to see what the new plan looks like.”
He said the General Assembly would have to fund an appropriation bill to continue paying for the Affordable Care Act.
“We’ll keep the program in place until there’s a new directive on the federal level,” Dismang said.
He said the heavy lifting on the budget would occur later in the session when there’s more information on general revenues.
CUTS LIKELY
Hutchinson put state de-partment heads on notice Friday that funding cuts are likely.
“I appreciate the legislature’s overwhelming bipartisan support for my $50 million tax cut, and I am proud to be able to sign this bill into law,” Gov. Asa Hutchinson said Wednesday.
“With today’s actions, we will have provided $150 million in substantive income tax relief to nearly 1.3 million Arkansans in the past year. In fact, 90 percent of the state’s individual income taxpayers will have benefited from substantive tax relief legislation since I took office in 2015,” the governor said.
The tax cut will benefit 650,000 low-income Arkansans earning less than $21,000 a year, saving an individual as much as $156, according to the governor’s office.
That takes effect in January 2019.
Because the state’s fiscal year runs July 1 through June 30, the first year’s tax cut will be only about $25 million.
He said the additional money in the pockets of low-income Arkansans would give a boost to the state’s economy because they are likely to spend that money on local goods and services.
State Sen. Jane English (R-North Little Rock) sponsored the bill exempting the pay and benefits of military retirees, which is expected to cost the state about $13 million in its first full year of implementation, with anticipated payback five or six years in the future.
ECONOMIC DEVELOPMENT TOOL
State Rep. Bob Johnson (D-Jacksonville), who sponsored and worked for the exemption in the House, sees it as much of an economic development tool as it is a reward for retired members of the military.
The governor says it should help recruit new military retirees to the state and keep the old ones by eliminating the tax on military retirement pay.
Keeping a skilled workforce of young military retirees will pay dividends in many ways, Johnson said. They will create jobs and take second jobs that they will pay taxes on, he said.
Passage of that bill essentially is a $6,500 a year boost to their income, and may keep people in the state as they retire, plus attract others to come here for the lifestyle or relatively low cost of living.
“This is huge for Arkansas,” Johnson said on Friday.
Exempted from state income tax would be the retirement pay and benefits of uniformed service retirees from the Army, Marine Corps, Navy, Air Force and the Coast Guard, as well as national guard and reserve components, the Public Health Service and National Oceanic and Atmospheric Administration commissioned officers.
PLAYING CATCH-UP
“Arkansas is playing catch-up to all of our surrounding states who have already discovered the benefits of attracting military retirees into the workforce,” according to Col. Steve Eggensperger, veterans affairs liaison to the governor.
“None of our neighboring states tax military retired pay,” he said.
Johnson said he’s not fond of the increased taxes on digital downloads or soft drinks and candy, but the revenue is needed to fund the tax cuts.
State Rep. Tim Lemons (R-Cabot) said he voted for the veterans tax break in part because Little Rock Air Force Base and many retired veterans are in his and neighboring districts, but he doesn’t like the funding mechanisms –increased taxes on candy and soft drinks and taxing digital downloads.
But, “You can’t vote against the vets,” he said.
He’s hoping for an opportunity later to change that. He said opponents were successful in derailing a provision that would have essentially doubled the sales tax on mobile homes to about $4,100.
