Arkansas legislator files bill once again on military-retiree tax waiver

Legislation to secure an income-tax exemption for retired members of the armed forces was resurrected Tuesday, the first day of bill-filing in advance of the January legislative session.

Rep. Charlene Fite, R-Van Buren, filed a bill that would exempt from taxes the retirement benefits paid to people who had served in the Army, Marine Corps, Navy, Air Force, National Guard, reserves, the Public Health Service commissioned regular or reserve corps or National Oceanic and Atmospheric Administration Commissioned Officer Corps. The exemption also would extend to retirees' survivors. The legislation is House Bill 1003 and is co-sponsored by Rep. Scott Baltz, D-Pocahontas.

All retirees currently have a $6,000 income-tax exemption in the state tax code.

"I'm thinking that this would help attract some of the people that we'd like to get to the state," Fite said in an interview. "A lot of people already have skills that they've acquired in the military, and they have spouses that are going to be working, they're going to be buying houses, they're going to be putting their children in college. I'd like for that to all be in Arkansas."

She said her daughter and son-in-law are returning from military service in Germany, and many of their friends are discussing moving elsewhere because of tax benefits in other states.

Fite's bill comes after she and Sen. Missy Irvin, R-Mountain View, sponsored unsuccessful legislation in 2015 that would have phased out income taxes on all military retirement and survivor benefits by the tax year starting Jan. 1, 2018. Fite's legislation died in the House Revenue and Taxation Committee; Irvin's bill died in the Senate Revenue and Taxation Committee.

According to the state Department of Finance and Administration, the 2015 legislation would have reduced state general revenue by $13 million a year in fiscal 2018 and thereafter.

Lt. Gov. Tim Griffin, a Republican, said Tuesday, "It is fundamentally the same bill that she had before and I support it 110 percent.

"I think it's a great bill. I know it already has a lot of support," he said. Griffin is a lieutenant colonel in the Army Reserve.

At least 18 states exempt some amount of military retirement or survivor pay, according to Military.com, a website that covers government benefits for veterans, among other topics.

Some -- like Arizona -- exempt less military retirement pay than Arkansas' broad exemption for all retirees, according to the website. Others, like Missouri and Kansas, exempt all retirement income, as is proposed in Fite's bill.

Fite said she never pressed for a vote on the 2015 bill because it was "not in the governor's tax plan."

During the 2015 session, Griffin told the Senate Revenue and Taxation Committee that the state could afford legislation phasing out state income taxes on military retirement benefits.

But a few senators challenged Griffin to find the money in Republican Gov. Asa Hutchinson's proposed general-revenue budget of $5.2 billion for fiscal 2016 to pay for the tax cut. Their challenge came after the Legislature enacted Hutchinson's proposed $100 million-a-year income-tax cut.

"This time, the governor is studying it very closely," Fite said. "I put it out early so it can be given the study that I'd like everybody to give it."

Last week, Hutchinson presented lawmakers with his proposed general revenue budget of $5.48 billion for the next fiscal year, a $153 million increase in which most of the additional money would go to the state Department of Human Services.

Hutchinson said he would ask the Legislature, which convenes Jan. 9, to enact a tax cut that would become effective in the last half of fiscal 2019. The tax cut, taking effect Jan. 1, 2019, would reduce general revenue by $25 million in fiscal 2019 and would reduce revenue by $50 million a year. He prefers an income-tax cut but hasn't made a decision.

The state now is in fiscal 2017, which started July 1. Fiscal 2018 starts July 1, 2017. Fiscal 2019 starts July 1, 2018.

Griffin said Tuesday that he would continue to fight for the legislation to exempt military retirement benefits from the state income tax.

"Would I rather the entire tax code be reformed from scratch? Is that my preference? Absolutely. I would like to give everyone massive tax relief and reform the government," he said. "That's not going to happen tomorrow. That's going to take some time."

Fite said she did not see Democratic control of the House Revenue and Taxation Committee as an obstacle for the bill.

"There was a lot of bipartisan support last time," she said.

Bills initially are assigned to House or Senate committees for consideration. Those committees determine which bills move to the full House or Senate for votes. If a bill stalls in a committee, two-thirds of the lawmakers in a chamber can vote to extract it, although that power is rarely used.

House Speaker Jeremy Gillam, R-Judsonia, decides House committee assignments for bills.

"Who knows what committee this might go to? It might go in the House to Aging, Children and Youth" while still going to the Senate Revenue and Taxation Committee, Fite said.

Likewise, Griffin said: "I feel pretty good about this bill becoming law."

After House Democrats gained 11 of the 20 members of the House Revenue and Taxation Committee after the Nov. 8 election in which their ranks dropped from 34 to 26 in the 100-member House, Griffin last week tweeted that it's "an affront to voters and outrageous. Unacceptable."

At that time, he said his concern was unrelated to his support for legislation exempting military retirement benefits from the state income tax.

Fite's bill is one of two prefiled Tuesday. House Bill 1002, by Rep. Mark McElroy, D-Tillar, would require that certain school buses be equipped with seat belts and to enforce their use.

Metro on 11/16/2016

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