Lawmakers Hear Tax Reform Proposals

LITTLE ROCK, Ark. -- A plan to cut taxes is shaping up to be one of the biggest issues lawmakers will discuss during the legislative session that starts in January.

On Monday, lawmakers were presented with a study detailing problems with the Arkansas tax code that the authors say put the state at a competitive disadvantage.

"Arkansans think the tax system is too unfair, is too complex and is too costly," said Nicole Kaeding with the conservative Tax Foundation. "The amount of income going to paying state and local taxes in Arkansas is higher here than it is in most other states."

To lessen the burden, Kaeding says state lawmakers should consider cutting individual and corporate tax rates while at the same time eliminating corporate tax credits and other loopholes.

"That would meet the governors goal of lowering the individual income tax to five percent," Kaeding said. "It would also lower the corporate income tax to five percent and pay for those changes with a number of changes to the sales tax base."

The plan could be used to achieve the $50 million dollars in tax reduction by 2019 called for by Governor Asa Hutchinson.

Kaeding did have a warning for lawmakers pointing to states like Kansas and Louisiana that enacted tax cuts and then ran into problems with inadequate revenues.
She recommends the state use "triggers" that only allow tax cuts to go through only after the state pays its bills.

"Really the litmus test is reasonable and responsible," said State Rep. Michael John Gray, D-Augusta.  

Democrats, who despite their low numbers in the state legislature have a majority on the House Revenue and Taxation Committee are promising to examine any proposed tax cuts closely to make sure essential programs are not hurt.
Republicans say Arkansas must improve its tax competitiveness to attract jobs.

"Whatever we can do to get there as quickly as possible I'm interested in having that conversation," said State Rep. Jim Dotson, R-Bentonville.

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