Senator Ben Gilmore (R – Crossett) discusses a recent op-ed he and Rep. Howard Beaty (R – Crossett) published in the Democrat-Gazette discussing the upcoming special session and ways the Arkansas State Legislature can take proactive steps to provide economic relief to small business owners.
Both Senator Gilmore and Rep. Beaty’s districts are made up of rural areas with loggers and farmers. Gilmore says it is time for these constituents to be able to compete on a level playing field with their competitors in neighboring states by allowing them to deduct the maximum depreciation expense. This will in turn encourage more small business owners to take the leap and invest in our economy.
by BEN GILMORE AND HOWARD BEATY Special to the Democrat-Gazette | June 26, 2022 at 1:47 a.m.
There’s no way around it: Bidenomics is crushing our economy. Historically high inflation, raising the cost of everyday necessities like food and school supplies, is ravaging the nation.
In Arkansas alone, goods and services are up by more than 13 percent across the board since Joe Biden took office. To top it off, record-setting gas prices now average more than $4.50 per gallon across our great state, with no end in sight.
Arkansans are feeling the weight and strain of these symptoms of failed leadership. But perhaps no one feels it as much as our small businesses, particularly our world-class farmers and loggers whose ability to survive depends on the stable price of fertilizer and fuel.
As state lawmakers, we can’t stop Washington’s spending spree or end Russia’s war in Ukraine, both of which are driving our current economic conditions. However, we take proactive steps to provide relief to Arkansans. Sitting idly by is simply not an option.
Did you know that when Arkansas small businesses invest in new equipment and property, they can’t take the same amount of depreciation expense deductions from their taxes that businesses in surrounding states are allowed?
That’s because at some point, state government arbitrarily decided it would be better to force businesses to spread their depreciation expense deductions out over several years at an amount lower than any of our neighboring states. It’s a classic case of “government knows best.”
But here’s the problem: With this arbitrary rule in place, Arkansas businesses have fewer resources to invest in equipment and property that will help expand their businesses and create more jobs for Arkansans, putting those businesses in an uncompetitive position.
Take Bob, a soybean farmer in northeast Arkansas. Today, if Bob decides to purchase a new $250,000 tractor–then employ a new worker to operate the tractor–Bob could take a maximum of $25,000 depreciation expense to reduce his tax burden.
A soybean farmer in Mississippi, Oklahoma, Louisiana, or Missouri could take the entire $250,000 depreciation expense to reduce their tax burden. So in an unstable Biden economy, perhaps Bob decides to hold what he’s got and not expand. After all, a bird in the hand is better.
But that means an Arkansan does not go to work driving Bob’s tractor, lost revenue for the local tractor dealership in Bob’s hometown, and a more stagnant state economy at a time when we need investment and growth as much as ever.
Our pitch is quite simple: We should take immediate actions to allow Arkansas small business owners like Bob to compete on a level playing field with their competitors in neighboring states and nationally by allowing them to deduct the maximum depreciation expense. This will without a doubt encourage more small business owners to take the leap and invest in our economy.
President Trump and congressional Republicans saw the value in this simple change when they passed the Tax Cuts and Jobs Act (the Trump tax cuts) in 2017. They simplified and modernized the tax code to allow full deductions to be taken immediately at the federal level.
But Arkansas has not yet followed suit and brought our tax code into alignment with this common-sense standard. We should, and the time is now!
If we make this simple change, we can reward and encourage small businesses across our great state to invest and expand when we need it the most, right now.
For those who might raise concerns about the “cost” to the state of a tax change like this, rest assured that the fiscal impact would be minimal: This is simply a timing change and an increase in deductions that will benefit all Arkansans.
In fact, this tweak to our tax code could actually have a positive revenue impact as businesses spend more and hire more, meaning more jobs for Arkansans and perhaps even fewer Arkansans dependent on welfare and unemployment, which mean more tax revenue and more resources available for the truly needy who depend on the safety net.
We can’t fully absolve the pain the Biden administration is inflicting on Arkansas’ economy. But this common-sense proposal is a huge step in the right direction.
If the Legislature convenes later this year for a special session, this proposal should be at the top of the docket. It’s truly an opportunity Arkansas small businesses cannot afford to miss.
Sen. Ben Gilmore currently represents state Senate District 26; Rep. Howard Beaty represents state House District 9. Both Republicans are in their first legislative terms and serve as co-chairs of the newly created Arkansas Legislative Forestry Caucus. Their districts represent parts of southeast Arkansas.