Friday, January 13, 2017

TOP STORY >> Tax cuts set to help vets on pensions

Leader senior staff writer

The general assembly gets down to work in earnest next week, with consideration of the governor’s agenda including two proposed tax cuts, according to state Rep. Bob Johnson (D-Jacksonville).

The session began Monday when 76 Republicans and 24 Democrats in the House and 26 Republicans and nine Democrats in the Senate took the oath of office.

State Sen. Jeremy Gillam (R-Judsonia) was re-elected House speaker and Sen. Jonathan Dismang (R-Searcy) was re-elected Senate President Pro Temp.

Among housekeeping measures in the House, most Republicans and a handful of Democrats voted to let the House speaker make all committee appointments in the future.


The governor has proposed a $50 million tax cut for Arkansans earning less than $21,000 a year. A second proposal would exempt military retirement pay from state income taxes and could, initially cost the state $10 million to $13 million a year, but over time is expected to be a revenue generator by making retirement in the state more attractive, supporters say.

There are three similar bills proposed, including one sponsored by Johnson and Sen. Jane English (R-North Little Rock).

Styled SB 13, the bill sponsored by English in the Senate and in the House by Johnson would also eliminate state income tax on militarybenefits. That bill has been sent to the Senate Committee on Revenue and Taxation and is on the committee agenda for Wednesday.

HB 1003, sponsored by state Sen. Charlene Fite (R-Van Buren), state Sen. Missy Irvin (R-Mountain View) and state Rep. Scott Baltz (D- Pocahontas), was referred to the House Committee on Revenue and Taxation Monday. It is essentially the same bill as the English-Johnson version.

“I think it’s going to go through within 10 days,” Johnson said. He said he had encountered no organized opposition, although “not everyone’s on board.”

The governor’s agenda is likely to be considered first, and the tax issues are likely to be at the top.

“We’ll start working on the governor’s whole tax package,” Johnson said. It could take two weeks.”


Gov. Asa Hutchinson has proposed a tax cut initiative to recruit new military retirees to the state and keep the old ones by eliminating the tax on military retirement pay. It’s being styled as an economic development initiative, as well as the right thing to do for veterans.

“Arkansas is playing catch-up to all of our surrounding states who have already discovered the benefits of attracting military retirees into the workforce. None of our neighboring states tax military retired pay,” said retired Col. Steve Eggensberger of Cabot, the governor’s liaison for veterans affairs.

The governor’s approach would offset more tax reductions with the repeal of other exemptions. He would remove the exclusion from income on unemployment compensation, which would create $3.1 million in additional General Revenue.

By applying the sales tax on the full cost of manufactured housing, the state would generate $2.4 million in additional General Revenue.

The state could levy the full sales tax on the sale of candy and soft drinks. (Candy and soft drinks are currently taxed at a lower rate under the Grocery Tax.) This proposed change would bring in $13.8 million in additional General Revenue.

In all, closing exemptions would add $19.3 million to state revenues. It would provide $6.3 million for the Medicaid Trust Fund, leaving it intact, the governor said.


“I’m not sure the tax package will help the poor,” Johnson said. “I want to make sure we can afford it.”

“We haven’t met our (revenue) projections yet,” Johnson said. “I don’t know if we can do that.”

“We haven’t even had committee meetings yet. No bills other than funding bills,” she said.

English said she’s optimistic about her bill on the military income tax exemption.

She said she’s not heard any proposals or bills yet that would establish a permanent funding source for the state Transportation and Highway Department.

Sen. Eddie Joe Williams (R-Cabot) said he believed the tax cuts would pass without a lot of opposition.

Other issues and challenges facing the General Assembly this session include organizing and starting the process needed to grow and distribute medical marijuana.

There could be tweaks to what may be the final year of Obamacare. On Friday, the U.S. House of Representatives voted to begin dismantling Obamacare, also known as the Affordable Care Act.

Bills pertaining to teacher’s health insurance, gun laws and abortion will likely be filed.

As the guys in the bleachers like to say, “when the legislature is in session, nobody is safe.”