By John Lyon
Arkansas News Bureau

LITTLE ROCK — Over the objections of state finance officials, the House Revenue and Taxation Committee endorsed six proposed tax cuts Thursday, including a capital gains tax break of nearly $43 million.

The committee recommended House Bill 1947 by Rep. Ed Garner, R-Maumelle, which would exempt from the state income tax the net capital gains from the sale of Arkansas property that was acquired after July 1 of this year and owned by the taxpayer for more than one year prior to the sale.

The state Department of Finance and Administration expects the tax break to cost the state $42.8 million in fiscal year 2011 and $65.9 million in fiscal year 2012. Garner said DF&A’s estimates did not take into account the economic benefits that would result from creating more incentives for businesses to invest in Arkansas.

“We could emerge as one of the leaders in economic development among all the states,” Garner said.

Gov. Mike Beebe said later he did not see how the state could afford the tax break.

“I’ve talked to Rep. Garner, and it’s like a lot of things, in principle what he says makes a lot of sense. The question is, how do you afford it?” he said.

Other tax-cutting measures endorsed by the committee Thursday, despite opposition from DF&A, were:

—HB 1905 by Rep. Larry Cowling, D-Foreman, which would gradually reduce the sales tax on utilities for agricultural structures such as chicken houses, taking the rate from the current 6 percent down to 1.375 percent by 2014.
The impact on state revenue is estimated at nearly $1 million in fiscal year 2010, growing to nearly $10 million by fiscal year 2015.

—HB 1225 by Rep. Eddie Cooper, D-Melbourne, which would increase from 45 days to 90 days the time a seller of a vehicle has to deduct the vehicle’s value from the price of a new vehicle for purposes of determining the sales tax on the new vehicle.

The impact on state revenue is estimated at $1 million.

—HB 1920 by Rep. Keith Ingram, D-West Memphis, which would create an equity investment tax credit equal to 50 percent of the amount invested and a tax credit for regional or community-based alliance funds equal to 100 percent of start-up costs, up to a maximum of $50,000.

DF&A estimates the impact on state revenue at $1 million.

—HB 2060 by Rep. John Lowery, D-El Dorado, the commission’s chairman. The bill would create a sales tax exemption for the SHARE Foundation, a nonprofit health care system in El Dorado.

Nonprofit organizations are not exempt from sales taxes in Arkansas if they compete with private businesses. Lowery said SHARE operates a gym that charges for membership.

DF&A estimates the impact on state revenue would be in excess of $60,000.

—HB 1748 by Rep. Steve Breedlove, D-Greenwood, which would allow businesses and individuals to deduct the cost of purchasing and installing a solar energy system from their income tax. The impact on state revenue is estimated at $42,000.