- Associated Press - Saturday, November 19, 2016

LITTLE ROCK, Ark. (AP) - Months after he was elected into office by double digits over a Democratic rival, Republican Gov. Asa Hutchinson faced little resistance last year as he pushed through a $102 million income tax cut that had been the centerpiece of his campaign. But with tax-cut-happy Republicans growing their ranks in the Legislature and Democrats angling for leverage on a key House committee, following up on that accomplishment won’t be an easy feat in next year’s session.

Hutchinson announced the day after the Nov. 8 election that he wants another $50 million tax reduction, starting a fight with fellow Republicans and Democrats over competing tax cut ideas that’ll come up in the 2017 session. With state revenue so far falling behind expectations and an already tight budget, Hutchinson’s warning that there’s not much more room to fund other tax breaks.

“It does not take a Ph.D. in economics to know that we can’t say yes to every spending need, and we should also not say yes to every tax cut idea,” Hutchinson told lawmakers as he detailed his budget proposal. “We have to set priorities and we have to measure results.”

Hutchinson hasn’t given specifics in his tax cut plan, which he wants to take effect in July 2018, but there are already other Republicans who believe the state can afford deeper cuts sooner for taxpayers. Republican Sen. Bart Hester has said he’ll propose a $105 million income tax cut, a reduction he said could be partly funded by imposing an additional tax on medical marijuana sales that voters legalized this month.

A tax break that didn’t advance in last year’s session will also be revived. Republican Rep. Charlene Fite last week filed legislation that would exempt veterans’ retirement and survivor benefits from the state income tax. State finance officials said a similar tax break proposed last year would have cost the state $13 million a year if fully implemented.

Fite said she believed there would be enough support for her proposal, which she said would help attract veterans to live in the state.

“I don’t really see this as a special carve-out for a group,” Fite said. “I see this as an economic incentive.”

A complication in the tax cut fight will be the House Revenue and Taxation Committee, where Democrats have secured a majority of the seats. Republicans maintain a majority of seats on the Senate tax panel, as well as both chambers of the Legislature, but the development could give Democrats more of a platform in the tax cutting debate.

Democrats are likely to use their position to argue for more relief for lower income taxpayers, something they argued was lacking in the tax cut plan approved last year, as well as warning that the cuts shouldn’t come at the expense of other services they say have suffered in recent years.

Democratic Rep. Joe Jett, a member of the House tax panel, said he’d like any tax cut to be triggered only if state revenue hits a certain mark. Jett suggested making any tax cut a lower category in the Revenue Stabilization bill, the state’s budget measure that sets spending priorities based on expected revenue.

“It protects the budget in case we miss the forecast,” Jett said.

Legislative leaders aren’t endorsing a specific tax cut proposal at this point. House Speaker Jeremy Gillam, a Republican, said he wants the Legislature to take a deeper look at the state’s tax structure in next year’s session.

“I’m very much in favor of a more long term strategic vision when it comes to tax policy, so we’re going to have those discussions not only in our caucus but in the body as a whole and we’re going to see what we can gather around and have a consensus,” Gillam said.


Andrew DeMillo has covered Arkansas government and politics for The Associated Press since 2005. Follow him on Twitter at www.twitter.com/ademillo

An AP News Analysis

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