Tax Reform Task Force Cites ACRE Scholar Horpedahl

By Caleb Taylor

The Arkansas Legislative Tax Reform and Relief Task Force cited UCA Assistant Professor and ACRE Scholar Dr. Jeremy Horpedahl’s work on property and sales taxes in its interim report released on December 18th.

The 180 page report produced by Public Financial Management (PFM) summarizes the task force’s work so far to modernize and improve Arkansas’s taxation. PFM had been assisting the task force in its tax reform efforts since September 2017. 

Sales Taxes

In its section on local option sales taxes, PFM cites Horpedahl’s work on the variability of county sales tax rates across Arkansas. You can read ACRE’s one-page summary of data related to this issue here.

PFM writes in the interim report:

“When possible, the ability of local governments to set (or not set) a local option rate and/or set a varying rate can lead to significant uncertainty related to overall sales tax rates in a state.”

Property Taxes

The report also cites Horpedahl and the Tax Foundation’s Nicole Kaeding blog post published on December 5, 2017 entitled “Property Taxes in Arkansas.”

PFM writes that the U.S. Census Bureau, Horpedahl, and Kaeding agree that some property taxes in Arkansas should be considered as part of Arkansas’s overall state tax burden despite property taxes being levied at the local level.

Horpedahl and Kaeding write:

“While property taxes in Arkansas are primarily a local function, there are good reasons to think of some real property taxes as state-level taxes, even though legally they are local taxes. Specifically, Amendment 74 to the Arkansas Constitution (narrowly approved by voters in 1996) requires all school districts to set a minimum 25 mills property tax. (Because Arkansas taxes based on 20 percent of assessed value, 25 mills is essentially equivalent to 0.5 percent of property’s value.) The proceeds of this minimum property tax for school districts are then redistributed from the state to local school districts. Since local governments (school districts) are required by state law to collect this tax, it makes sense to think of it as a state-level tax.”

To Learn More

The task force will meet next at 9 a.m. February 5th in Room B of the MAC Building in the State Capitol. Their final report on improving Arkansas’s tax code is due by September 1, 2018.

For more of ACRE’s work on tax reform, read “Arkansas: The Road Map To Tax Reform” authored by ACRE Scholar and UCA Assistant Professor of Economics Jeremy Horpedahl and Tax Foundation experts. The rest of ACRE’s work on tax policy can be found here.