Arkansas Gubernatorial Candidate Would Cut Manufacturer's Tax
- Oct 29, 2013 | Gail Cole
Arkansas gubernatorial candidate Mike Ross would like to gradually eliminate the sales and use tax manufacturers pay when they repair or partially replace machinery. The goal? To boost manufacturing and spur job growth.
Because the state already allows an exemption for new plants and new plant expansions, Ross argues that the manufacturer’s tax “unfairly punishes manufacturing plants already in Arkansas.” If costs associated with partial replacements and repairs were exempt from sales and use tax, current manufacturers would be more able to “upgrade their facilities so they can modernize, remain competitive and continue to grow and hire more workers.”
In addition, a lower rate would make Arkansas more competitive with neighboring states, “many of which have already done the same,” according to Ross. Because of a constitutional amendment, the tax could only be cut to 0.625%.
The 6.5% tax is already on its way down. Earlier this year, Arkansas lawmakers passed a law that will lower the rate to 4.875% in FY 2015. Companies that repair and partially replace existing machinery and equipment will also be refunded the cost of the equipment and the labor to install or repair it.
The Department of Finance and Administration predicts that every point of reduction would “cost the state $7-9 million.” Ross has put a $40 million price tag on phasing out the rest of the tax, but he has not provided a timeline.
Republican Asa Hutchinson, who will likely oppose Ross on the ballot, called the manufacturer’s exemption “narrow” and says “it would not help other industries, such as tourism, retail, or the knowledge-based sector.”
In addition to a reduced tax on certain manufacturing equipment, the manufacturing industry will soon benefit from a reduction in the sales and use tax on natural gas and electricity. Under SB 791, the rate is reduced to 1% on July 1, 2014. It will be completely eliminated one year later, on July 1, 2015.
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