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In State of the State, Hutchinson Seeks Committee to Study Tax Reform

4 min read

Arkansas Gov. Asa Hutchinson is asking lawmakers to form a task force to recommend further changes to the state’s tax code, calling for deeper reforms as he faces divisions with fellow Republicans over dueling tax cut plans.

Hutchinson called on lawmakers Tuesday to enact his $50 million tax cut for more than 600,000 people making less than $21,000 a year. The Republican governor has faced resistance from some lawmakers who say they want to see deeper cuts that will take effect sooner.

Hutchinson said the task force would focus on further reducing income tax rates in Arkansas to make the state more competitive. He said the plan fits his goal of reducing the “overall high income tax rate” for all Arkansans.

“The priority goals are fairness, competition, simplification and economic growth,” Hutchinson said. “The focus of the plan is to reduce the high income tax rates in Arkansas. We need to have a plan to reduce the tax rate over time to a more competitive level.”

Hutchinson’s remarks came in his “State of the State” address to a joint session of the Legislature, which convened Monday. In his speech, the governor noted the 50th anniversary of Republican Winthrop Rockefeller’s inauguration and sought to strike a tone of optimism about what lawmakers can do together.

“Today we have our own moment in history, and we can only be worthy of this moment if we work together,” Hutchinson said.

More: Read the full transcript of the governor’s speech here.

At least two GOP lawmakers who had been pushing for deeper tax cuts said they’re dropping those efforts during this year’s session after Hutchinson’s proposal to pursue more tax code changes.

“There are still some unanswered questions, but I’m optimistic that we’re going to be looking at a major overhaul of our tax system in two years,” said Republican Sen. Bart Hester, who had been calling for a $105 million income tax cut. “If that’s the direction we’re headed, I’m happy to get on board right now.”

Republican Rep. Charlie Collins, who had suggested halting a planned grocery tax cut to pay for further income tax reductions, also said he backed the governor’s plan.

“We’re going to set the task force up so it’s actually recommending things before the 2018 election cycle so this is stuff people are going to have to own,” Collins said.

The top Democrat in the House said he was encouraged by Hutchinson calling for the panel to look at tax changes rather than call for cuts that could hurt vital services. Republicans hold a majority in both chambers of the Legislature, but Democrats hold half the seats on the House committee that’s expected to take up any tax cut bills.

“The governor and I are on different sides of the fence on a lot of issues, but the governor understanding that the budget matters and before we just do tax cuts in the name of tax cuts that we ought to take a reasonable, responsible look at this I think you’ve got to say that’s a good move,” House Minority Leader Michael John Gray said.

Growing Economy, Higher Education

The governor told lawmakers that Arkansas had a unique opportunity to innovate in areas such as education and health care. He called the state of the state “exceptional,” citing a growth in Arkansas’ population and its economy. He said he expects Arkansas’ population to pass 3 million this year, that the state’s economy grew at a faster pace than three-quarters of states and that Arkansas’ per capita income grew faster than the national average.

The governor also pointed to the state’s historically low unemployment rate and economic development successes, like firearms manufacturer SIG Sauer’s plans to make ammunition in Jacksonville; Mars Petcare’s $72 million expansion in Fort Smith; FMH Conveyors’ new $12.5 million plant in Jonesboro; and J.B. Hunt Transport Services’ growth in Rogers.

Hutchinson also called on legislators to approve his proposed $50 million tax cut plan for low income Arkansans and a $13 million tax break for military veterans. Approving the cuts would mean that legislators, who previously approved a $100 million tax cut for middle income earners, will have cut taxes for 90 percent of Arkansas taxpayers.

The governor touted initiatives in higher education. His proposed ArFuture Grants program would provide two years of tuition and fees at an Arkansas community or technical college to any student who enrolls in a high demand field of study, such as computer science or welding. The governor has proposed funding the program by redirecting $8.2 million in general funds from other grant programs.

He said the program would make it possible for a student to get a two-year degree or certificate without any debt.

The governor is also urging lawmakers to approve a new funding formula for the state’s colleges and universities. The plan, unveiled last year, would tie higher education funding to performance factors such as graduation rates.

Hutchinson also touted previously announced plans to make state government more efficient, increase funding for mental health resources and the state’s foster care program and reduce the disability services wait list with the help of tobacco settlement dollars.

Asa Hutchinson’s State of the State Speech

(The Associated Press contributed to this report.)

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