Dear Chairman Teague and Members of theCommittee:
Onbehalf of the National Taxpayers Union’s (NTU)’s nearly 3,200 members inArkansas, I urge you to support House Bill 1002 (HB 1002), which wouldeliminate the Arkansas’ tax on capital gains on property and new investments inthe state. The Arkansas House already passed HB 1002 by vote of 53-43.
Arkansas’state and local tax burden as a percentage of state income is the 14thhighest in the nation and higher than any of its neighbors, according to thenon-partisan Tax Foundation. Moreover, Arkansas’ business tax climate ranksonly 40th out of 50; even economically depressed Michigan performsbetter than Arkansas in this regard. What’s worse, Arkansas borders a statewithout an income tax (Texas) and a state without a broad-based wage tax(Tennessee). As Texarkana’s adverse experience in coping with a higher stateincome tax rate in the1970s (and its resurgence after enactment of anexemption) has clearly demonstrated, tax competition between the states shouldnot be taken lightly. To grow the economy by attracting investment and jobs,Arkansas needs to be more aggressive toward improving its tax climate.
HB1002 would significantly strengthen Arkansas’ tax competitiveness. Byeliminating the tax on capital gains generated by property and new investmentsin the state, HB 1002 will help to enhance business activity and employmentopportunities. Additionally, although some predict that HB 1002 will “cost” thestate in foregone tax collections, there is strong evidence to suggest thateliminating the capital gains tax in this manner will likely produce morerevenue for Arkansas in the long run. The last five reductions in the federalcapital gains tax all increased the federal government’s revenue. Further, theSouthern and Southeastern regions of the U.S. already boast of many states withlighter tax burdens or lower rates than Arkansas. Florida and Texas forexample, do not impose a capital gains tax at all, whereas others offer lessharsh income taxes overall. In fact, just a few months ago, Missouri votersenacted a ballot measure that will prohibit the imposition of any newlocal-level earnings taxes. Now activists are crafting a plan that mayeliminate Missouri’s state-level income tax entirely. With developments likethese, Arkansas should not risk falling further behind in tax policy.
With the state’s unemployment rate currently at 7.5 percent, Arkansansare counting on their elected officials to remove all obstacles to a recovery.Dramatically reducing the capital gains tax as envisioned in the legislationnow before you would go a long way in spurring investment, job creation, andeconomic growth in the state. Therefore, our members hope that you will supportHB 1002.
Sincerely,
John Stephenson
State GovernmentAffairs Manager