Panel backs pick for tax-redo consultant

The Bureau of Legislative Research would pay up to $312,750 to a Philadelphia-based consultant to assist the Legislature's tax-overhaul task force under a proposed contract that cleared a legislative panel on Thursday.

The Legislative Council's Policy-Making Subcommittee recommended that the council give final approval today to the contract with PFM Group Consulting. The contract would start today and end Dec. 31, 2018.

Under the terms of the proposal, the firm and the bureau have the option to renew the contract for six more months if an extension is warranted.

The proposal requires PFM Group Consulting to write a preliminary report by Dec. 1 this year and a final report by Sept. 1, 2018, with recommendations for the 2019 regular legislative session.

The 16-member Tax Reform and Relief Task Force voted 9-1 to hire PFM Group Consulting last week because "we felt this was the group that could bring the expertise that we need as we start trying to figure out ways to reform and potentially reduce our taxes," a task force co-chairman, Sen. Jim Hendren, R-Sulphur Springs, told the subcommittee Thursday.

The task force also interviewed BKD of Little Rock and WC Mitchell & Associates of North Little Rock. The maximum bid submitted by BKD was $550,000 and the one by WC Mitchell & Associates was $217,550, according to the Bureau of Legislative Research.

"We will provide the independent analysis as requested by the members of the force," said Randall Bauer, a director for PFM Group Consulting.

He told the legislative panel that he worked for 11 years in senior tax advisory positions for the Iowa Senate and seven years as Iowa's budget director.

The firm will conduct an economic analysis under which "we can do some types of what sometimes is referred to as dynamic scoring as it relates to tax alternatives," Bauer told the Policy-Making Subcommittee. Dynamic scoring predicts the impact of fiscal policy changes.

"We also bring a significant amount of experience as to what other states are doing, and benchmarking related to what your neighboring states and others that you are competing with in terms of their tax structure and their incentives," he said. He said Arkansas will be either the 26th or 27th state that he has worked with on tax studies.

The tax overhaul task force was created under Acts 78 and 79 during this year's regular legislative session in part to placate some lawmakers who favor granting more income tax cuts, particularly for Arkansans who earn more than $75,000 a year.

Under these acts, the Republican-controlled Legislature approved Republican Gov. Asa Hutchinson's plan to cut individual income taxes for Arkansans with less than $21,000 a year in taxable income. This plan is projected to reduce state general revenue by about $25 million when it takes effect in mid-fiscal 2019 and then by $50 million each year thereafter.

An earlier income tax cut, approved in 2015, reduced the rates for taxable income between $21,000 and $75,000 a year. That tax cut was expected by the state to reduce general revenue by $100 million a year in fiscal 2017, which ended June 30, and thereafter.

Hutchinson has said he favors additional income tax cuts. The governor is Hendren's uncle.

Asked about his remarks to the subcommittee that the task force will start figuring out ways to overhaul the tax code and potentially reduce taxes, Hendren said in an interview that "we are going to do two things."

He said he wants the task force to figure out the best way to revamp the tax code; find any inequities and what doesn't make sense; find what taxes should be reduced and which should be raised together in a revenue-neutral fashion; and whether there are simpler and easier ways to file taxes.

"But the other charge we have is if we want to do tax cuts, which I think we have proven over the last five years we are willing to do tax cuts ... we are going to develop a road map that says if you want to do $100 million in tax cuts, this is the smartest way to do it," Hendren said.

"I want to know which way we cut taxes is the best bang for our buck," he said. "We [task force members] are not going to set the level [of tax cuts]. That is a legislative function. But we are going to say if you want to reduce the taxes by $100 million, this is the best, most efficient way to do it, [and] if you want to do it for $200 million, this is the best, most efficient way to do it."

Metro on 09/15/2017

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