The Tax Foundation and the Arkansas Center for Research in Economics (ACRE) today released their official report, "Arkansas: The Road Map to Tax Reform." These two organizations have collaborated over the past several months, interviewing numerous stakeholders in business and government throughout the state. Their preliminary analysis and conclusions had been highlighted in a legislative hearing back in September (prior post). Today featured a press release and a legislative hearing before the Economic and Tax Policy Committee.
The fundamental narrative of the reform proposal remains the same: Arkansas needs to simplify its taxes and broaden the tax base, so that it can lower income tax rates, which are some of the highest in the South. The core of the report proposes three options for reducing Arkansas income tax rates through a tax cut, expansion of sales tax on services, and elimination of tax incentives. The report features many good, pro-business reforms, such as elimination of the franchise tax, repeal of the throwback rule, extension of the NOL carryforward period, and reduction in sales tax on business inputs. On the other hand, the proposal to largely eliminate tax incentives would hinder the state's economic development efforts.
While there might not necessarily be a comprehensive tax reform effort in 2017, aspects of the Tax Foundation / ACRE report should inform Arkansas tax policy in the 2017 legislative session and in years to come.