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Taxes/Government Spending

Senate Tax Committee Gets Underway

The Senate Tax and Revenue committee met in an organizational meeting on Wednesday. They are expected to be very busy this session debating various tax reform proposals. Income taxes, highway taxes, internet sales tax, and other tax measures may be heard in the coming weeks. The committee passed their rules and heard from the Bureau of Legislative Research (BLR) and the Department of Finance and Administration (DFA).

The Tax Task Force has met for the past year and a half researching tax reform. They released draft legislation and fiscal impact statements of proposals they have endorsed ahead of the session. Those plans combined with the Governor’s draft plan that was released would result in a net tax increase in the first fiscal year according to DFA fiscal impact statements.

Since the draft legislation has been released it was discovered the Governor’s income tax proposal would have raised income taxes on 200,000 filers. The Governor has decided to redo the plan to ensure that no filers see an increase on their income taxes. Other tax increase measures may or may not be included in the same income tax legislation.

The vast majority of items before the tax committee will have a fiscal impact statement. DFA was on hand to explain how those statements are completed. According to Paul Gehring of DFA, they read every bill that is filed in the General Assembly and identify those that need a fiscal impact. DFA uses various sources to issue their estimates. These include past actual returns filed, other government statistical information, statistical information from nonprofits, and third party sources.

Gehring stated that the goal was for the most accurate revenue impacts, but acknowled that they are just estimates. Gerring also explained how the estimates are static, and thus do not try to account for any economic changes that may come in the future. They also look at U.S. Supreme Court rulings so as not to run afoul of their precedents.

Gehring commented that they would not speak on the individual merits of a bill and whether or not it is good or bad public policy, but instead to make sure that the legislators have the best revenue estimates. Committee Chair Sen. Jonathan Dismang (R – Beebe) commented that DFA does oppose bills though that may not line up with the planned budget.

Gehring clarified that they would oppose bills that did not fit into the Governor’s budget. At the beginning of the meeting Sen. Dismang said legislation with revenue impacts would be held until later in the session so they could have a better picture of how it might impact the budget. Those bills held may be voted on as a package later in the session.

Richard Wilson of the Bureau of Legislative Research (BLR) presented the most recent revenue report to the committee. In the first six months the net revenue to state government was $163.2 million above the same 6-month period the year prior, a growth of 6.1%.

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