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Arkansas Tax and Incentives Update

Arkansas Tax Reform Task Force Hears Competing Views in July 11 Meeting


Matt Boch - Friday, July 14, 2017

The Arkansas Tax Reform and Legislative Relief Task Force met on July 11, 2017, for the first round of policy presentations by local and national organizations and to conduct other business. Arkansas Advocates for Children and Families (AACF) led by advocating various measures to benefit low income consumers. AACF criticized recent cuts in personal income tax rates and recommends Arkansas adopt a state earned income tax credit (EITC) based on the federal model. In the sales tax area, AACF recommends increasing taxes on business and reducing taxes on personal consumption. It also recommends increasing state investment in schools, highways, community safety and improving community amenities. With respect to highways, AACF recommends updating the fuel tax structure while offsetting the impact on low income working families using the EITC. AACF’s “Briefing Memo” is available here.

Council on State Taxation (COST) President Doug Lindholm followed with a very informative and detailed presentation based on COST’s recent study reports, national policy positions and a survey of its national and international members doing business in Arkansas. Mr. Lindholm focused on business tax issues that have been in the forefront of tax reform efforts in other states as well as concrete proposals from COST members that would improve the Arkansas business tax climate. In the income tax area COST recommends Arkansas continue to avoid mandatory unitary combined reporting; repeal Arkansas’ “throwback rule” used in apportioning corporate income taxes; conform Arkansas’ draconian NOL carryforward rule to the federal rule; and stick with a conventional tax structure in lieu of “alternative based” business taxes. COST also recommends phasing out the Arkansas franchise tax along with a number of other improvements in sales tax and property tax structure and procedure. Mr. Lindholm’s testimony and slide presentation are available here.

Kathleen Quinn with the National Conference of State Legislatures (NCSL) then compared Arkansas’ tax structure and “state and local tax reliance” to each of the six (6) surrounding states and the national average. From a policy perspective, Ms. Quinn observed that state economies vary, making tax structures unique, but it is important to “go slow” in cutting revenues from major revenue sources and restrict dramatic cuts to taxes that provide a lesser percentage of revenue. Ms. Quinn’s presentation is available here.

The Task Force staff reported that the RFP process to identify and select a qualified expert to work with the committee had not produced any qualifying proposals by the time the original deadline passed earlier this month. The RFP is being re-issued and staff intends be more pro-active in directing the RFP to qualified potential candidates. Proposals will now be due by August 10, 2017.

Future Task Force meetings are expected to be scheduled during the weeks of August 28-September 8, to be followed by review of a recommended consultant contract by the Arkansas Legislative Council. The revised RFP/consultant contract schedule of events is available here.

DDH Member Michael Parker authored this post.




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