By John Lyon
Arkansas News Bureau
LITTLE ROCK — Despite Arkansas’ abundance of trees, its timber industry has been dwindling, according to a state legislator who wants to expand an existing tax break for the industry.
The House and Senate revenue and taxation committees on Thursday adopted a proposal by Rep. Mike Burris, D-Malvern, to study completely exempting timber harvesting equipment from the state sales tax, as several other states have done.
Currently, a logger in Arkansas is exempt from taxes on the first $50,000 of the purchase price of a piece of equipment used to harvest timber, but the exemption has to be claimed as a rebate, so the logger has to pay the full price up front.
Meanwhile, Texas, Missouri and Tennessee offer complete exemptions, and Louisiana will offer a complete exemption starting July 1, 2010.
“One of the problems that we’re having, ladies and gentlemen, is that our equipment representatives, the people who sell equipment in different areas of the state, are having a real hard time competing with the contiguous states that do not have a tax,” Burris told committee members.
Burris said farm equipment is completely exempt from the 6 percent state sales tax, but the exemption does not apply to equipment used in the production of timber.
“What I’m really trying to do is just to create fairness,” he said.
Burris said the number of Arkansans employed in the timber industry has declined over the past 10 years from 44,000 to 32,000, a 25 percent drop.
A 100 percent sales tax exemption would cost the state $880,000 a year, according to an impact statement by the state Department of Finance and Administration.
Rep. Tracy Pennartz, D-Fort Smith, said the exemption might generate more revenue through job creation than it would take out of state coffers.
“Some tax exemptions, even though we give them an exemption, create income that then is taxed,” she said.
Rep. Allen Maxwell, D-Monticello, said he wondered how many jobs may have been lost in the timber industry because of high costs.
“A lot of people are in tough times. The loggers were in tough times before this recession started,” he said.
Burris sponsored a bill during this year’s legislative session that would have exempted timber harvesting equipment from the state sales tax, but in a year of tight budgeting only a handful of tax-cutting bills won passage, including a 1-cent reduction in the state sales tax on groceries that was backed by Gov. Mike Beebe.
