Ark. panel approves tax cut for farm structures

LITTLE ROCK, Ark. (AP) -- Farmers wouldn't have to pay sales taxes on utilities for several types of structures under a $10 million exemption backed by a House panel Thursday, the first major tax reduction up for a vote by that chamber this session.

The House Revenue and Taxation Committee backed the sales tax exemption on a voice vote, despite warnings from state finance officials that Gov. Mike Beebe's proposed balanced budget doesn't include room for additional tax reductions. The Republican-controlled panel also backed a smaller tax increase that a national group said wouldn't violate a pledge many lawmakers have signed to not support tax hikes as long as they back the farmers' tax cut.

The proposed agricultural tax break, which would take effect Jan. 1, is among dozens of cuts that lawmakers are considering after Republicans won control of the Legislature partly on a vow to cut taxes. The bill would exempt taxes on electricity, natural gas and liquefied petroleum gas used by several structures, including chicken breeding houses and milking parlors.

"I think this is a good sign that Arkansas does stand for agriculture," said Rep. Jeff Wardlaw, D-Warren. "We do want to help the folks who are feeding America and feeding the state."

The $10 million cut is among $150 million in reductions that House Speaker Davy Carter, R-Cabot, has asked lawmakers to approve during this year's session. Beebe, a Democrat, has said lawmakers calling for additional reductions need to identify what cuts they would make in the state's $4.9 billion budget. State finance officials echoed that concern.

"The administration does not have any room for any tax exemptions to fund the programs that are out there," Tim Leathers, assistant director of Finance and Administration, told the panel.

Beebe's only tax cut proposal is a grocery tax reduction that would only take effect if the state's bond obligations or desegregation payments to Little Rock area schools decrease by $35 million over a six-month period.

House Republicans have said their priority in tax cuts is reducing the state's income tax. Senate Republicans have said they're more interested in cuts that they believe would promote economic development such as reducing utility taxes for manufacturers. The Senate last week approved a measure to exempt active duty military pay from the state income tax, which would cost the state about $7.2 million a year.

The House panel also approved increasing the tax that private timberland owners pay from 15 cents an acre to 20 cents. The increase would raise about $700,000 for the commission, which handles the state's wildfire fighting efforts. The Senate approved the tax increase last week. Beebe has said he supports the tax increase.

The Washington-based Americans for Tax Reform told lawmakers in a letter dated March 5 that supporting the measure would not violate the group's pledge to not support any tax increases if lawmakers also approved the farmers' tax break. Eleven House members and eight state senators have signed the pledge.

"If HB 1039 is passed first, followed by SB5, then Americans for Tax Reform will be certain to inform Arkansas taxpayers that your vote in favor of SB5 is not in conflict with the Taxpayer Protection Pledge, because the effect would be a net tax cut," Grover Norquist, the group's president, told lawmakers in the letter.

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