Thursday, February 17, 2011

Week In Review

State Capitol Week in Review

LITTLE ROCK – The stage has been set in the Arkansas Senate for the big showdown of the 2011 legislative session.

At one end of the street are legislators who want to cut taxes by as much as $50 million a year and perhaps even more. On the other side are the governor, administration officials and legislators who fear that the loss of revenue from so many tax cuts will force state government to trim vital services.

The House passed three separate tax cut bills and sent them to the Senate, where they will be considered with Senate tax cut bills.

The strongest support in the House was for HB 1056 to exempt low-income parents from state income taxes if they have two or more children. It passed 93-to-0. It would save low-income families about $3.8 million a year.

HB 1052 to reduce the sales tax on manufacturers' utility bills passed 88-to-8. It would save manufacturers an estimated $4.2 million a year by lowering the sales tax rates on their utilities from 3.125 percent to 2.625 percent.

The House also passed HB 1002 to repeal the state capital gains tax on the sale of Arkansas properties and investments in companies headquartered in Arkansas. The vote was 53-to-43. Administration officials say it would lower state revenue by $44 million in 2013, but the bill's supporters dispute that estimate.

All three bills were sent to the Senate and referred to its Committee on Revenue and Taxation, where two Senate tax cut measures are also on the agenda.

One is SB 276 to lower the state sales tax on groceries by half a cent, reducing revenue for state government by about $20 million a year. It's the only tax cut supported by the governor.

Another tax cut proposal on the committee's agenda is SB 274 to raise the threshold under which used car purchases are exempt from the sales tax, from $2,500 to $5,000. If enacted it would save used car buyers about $7 million a year.

Even if all the tax cuts are enacted this year, their financial impact would not exceed that of the historic tax cuts passed in 2007, when the legislature cut taxes by about $200 million a year. Those cuts included a reduction of the grocery tax, reduced sales taxes on manufacturing companies' utility bills and the exemption of about 81,000 poor people from the state income tax.

In other news, a bill has been filed to relieve the debt problems of the state unemployment insurance fund. SB 305 would authorize the governor to call a special election, and if voters approve the state could issue bonds to pay off the $330 million it owes to the federal government.

The federal government has lent that amount to the state to cover the costs of unemployment benefits, which have skyrocketed in the bad economy.

Also, the Senate passed HB 1018 to prevent "double dipping" by local elected officials who took advantage of loopholes in the law to secretly retire and then reclaim their position. That allowed them to simultaneously collect a paycheck and a retirement pension. That will not longer be allowed.

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