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ACRE Scholar Quoted on State Tax Code Changes

By Aaron Newell

Comprehensive reforms – not special tax incentives – are key to making Arkansas a  more economically competitive state says Jeremy Horpedahl, ACRE Scholar and UCA Assistant Professor of Economics, who recently discussed Act 822 with Paul Williams at Law360.

This act, sponsored by Sen Bart Hester (R-Cave Springs) and signed by the governor, includes many of the provisions suggested by the Arkansas Tax Relief and Reform Task Force last year. In the (gated) article “Ark. Sends Remote Sellers, Corp. Tax Overhaul Bill To Gov.,” published on April 8, 2019, Horpedahl explains how broad based reforms like the ones included in SB576 are good policy.

Horpedahl states:

Research has shown that targeted incentives have not had any effect on convincing companies to locate here. . . This is more of a broad-based package that makes the tax code more attractive as a whole.”

This broad-based package Horpedahl references includes:

  • Requiring out-of-state sellers and marketplace providers to collect sales tax, which will generate about $35 million a year in extra revenue
  • Lowering the corporate income tax rate from 6.5% to 5.9% by 2022, which will cut taxes by about $30 million a year
  • Extend the state’s five-year net operating loss carryforward period to 10 years by 2021
  • Collect a tax on water that car washes use and tax online travel companies that book hotel stays through their web platforms
  • In 2021, the state will move to a single-sales-factor apportionment from its three-factor formula that counts a business’s property and payroll and double-weights its sales

 

Concerning this last change, Horpedahl told Law360:

 

Single-sales-factor apportionment is a simpler method for computing your tax liability, and it favors in-state businesses by generally lowering their corporate income tax obligations.”

 

Many of these changes come straight from recommendations from the Arkansas Tax Relief and Reform Task Force. Dr. Horpedahl, along with Nicole Kaeding of the Tax Foundation, both testified before the Task Force and further helped inform the discussion by through their research and writings, such as “Arkansas: The Road Map To Tax Reform” and “Learning from Other States’ Successes and Failures in Tax Reform.

If you want to see more of Horpedahl’s work on tax issues, you can view his author page here.

If you want to see more of ACRE’s work on these and related issues, go here.