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A co-chairman of the Legislature's tax-overhaul task force said Thursday that he's going to side with job creators and food and timber producers as the panel reviews the state's existing tax exemptions.

"When you dig down in here, you'll find out that there are exemptions that don't make any sense just because maybe a legislator at some point down the line was in that business and that's just how it fell," state Rep. Lane Jean, R-Magnolia, told more than 50 people attending a panel discussion on state and federal taxes at the annual Arkansas Farm Bureau convention in Little Rock.

"But ... we certainly don't need to hurt our farmers, our ranchers [and] our timber producers. We don't need to hurt our manufacturers because those are the jobs that we need in this state," said Jean, who described himself as an "ag guy" who has interests in cattle farming, timber and real estate.

"That's just my personal point of view. ... I have told the committee that whatever we do, we need to do it deliberately and we need to have a consensus that this is the route we go," he said.

State tax exemptions for agricultural interests are wide-ranging. They include an exemption for sales of feed used in commercial production of livestock and poultry that reduced tax revenue by about $99 million in fiscal 2011 under the latest estimates.

The 16-member task force, assigned the job of studying state taxes and recommending changes, was created under Acts 78 and 79 during this year's regular session. The task force was formed partly to placate some lawmakers who favor more income tax cuts, particularly for Arkansans who have more than $75,000 a year in taxable income, where the top tax bracket starts. The top bracket's highest rate is 6.9 percent.

Jean noted that Louisiana had severe budget problems and trouble funding colleges and other programs after it "slashed taxes" at the behest of then-Gov. Bobby Jindal, a Republican, and the energy industry "tanked." Jean said, "Whatever we do ... I don't think we need to be swinging for the fences."

He said the task force should review slightly less than $100 million of what he called "non-essential sales-tax exemptions and excise-tax exemptions" for possible elimination to help pay for tax cuts. After the meeting, he declined to cite an example of that type of exemption.

In addition, "I think spending cuts have got to be part of this equation to make a bang for your buck," said Jean, who also serves as a co-chairman of the Legislature's Joint Budget Committee.

He said he hoped that the Republican-controlled Congress would allow the federal government to give states block grants and flexibility for their Medicaid programs, so states could run their programs "a lot cheaper," but that's not happened yet.

The task force's other co-chairman, Sen. Jim Hendren, R-Sulphur Springs, said lawmakers could pay for tax cuts through a combination of increased revenue over previous years' collections, reducing the growth of spending and eliminating some exemptions.

"I think most of us were shocked at our last meeting to find out that we have over a billion dollars in sales-tax exemptions," he said. "Many of those may be absolutely appropriate, but, if just 10 percent of them are nonsense, that's a $100 million that we are putting Arkansas at a disadvantage with regard to how we compete with other states in tax policy."

Hendren, who owns Hendren Plastics Inc., said he wants to know if a particular group with an exemption needs to be protected over every other industry, whether that exemption is needed to be competitive with other states and whether it would be counterproductive to remove that exemption.

"In the agricultural business, I know you are competing with the farmers in Missouri and Tennessee and Louisiana," he said.

The 2015 Legislature enacted Republican Gov. Asa Hutchinson's plan to cut individual income-tax rates for Arkansans with taxable income between $21,000 and $75,000 a year. The state projected the plan would reduce general revenue by about $100 million, starting in fiscal 2017 that ended June 30 and subsequent fiscal years.

During this year's regular session, lawmakers enacted Hutchinson's plan to cut individual tax rates for Arkansans with taxable income of less than $21,000 a year. The state projected the plan would reduce general revenue by $25 million in fiscal 2019 that starts July 1, 2018, and $50 million in subsequent fiscal years.

Hutchinson has said he eventually would like to cut the top income-tax rate to 5 percent, but it could take a while to do so. The state projects that reducing the top rate in the two highest brackets to 5 percent would reduce general revenue by about $346 million a year.

Jackson County Justice of the Peace Tommy Young told Hendren and Jean that he doesn't understand why the Legislature doesn't tax sales over the Internet and "help protect our bricks-and-mortar businesses that are trying to survive in the smaller towns and cities.

"There is a lot of revenue that could be generated and we need that because it is simply getting worse," said Young.

Hendren said the state Senate approved legislation aimed at persuading out-of-state companies without a physical presence in Arkansas to collect taxes on their sales to Arkansans and remit the taxes to the state, but the bill narrowly failed to clear the House during this year's regular session. Amazon voluntarily started collecting sales taxes in Arkansas and remitted them to the state earlier this year.

"In this climate, [the legislation] is represented as a tax increase, although I think most of us know that taxes are already due [as a use tax]. They are not just being paid or collected," said Hendren, who voted for the bill.

The task force is required under state law to make recommendations to the Legislature by Sept. 1, 2018, in advance of the 2019 regular session.

Metro on 12/01/2017

Print Headline: Lawmaker talks tax breaks; some exemptions ‘don’t make any sense,’ he tells farmers

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