Nevada County Picayune and Gurdon Times Newspaper Archive

Governor Touts Tax Reform Plan

Arkansas Gov. Mike Huckabee has plans to reform the state tax codes.

In the agenda he had prepared for the 82nd General Assembly Huckabee wrote some of the changes made to the federal tax codes should be adopted at the state level to encourage taxpayers to save for their retirement.

These changes, he wrote, could assist them in funding the educational needs of their children and ease the burden of complying with tax laws.

First, he said, legislation needs to be adopted to authorize Roth individual retirement accounts (IRAs) at the state level.

Under this umbrella, taxpayers could contribute up to $2,000 annually to their Roth IRA account. While these contributions aren't deductible for federal or state income tax purposes, the earnings are allowed to accumulate tax free. Distributions from the account would also be tax free.

Next, he suggests tax-exempt IRAs should be authorized to allow taxpayers to save for their children's or grandchildren's higher education expenses. These education IRAs would allow contributions of up to $500 annually per beneficiary. While no deduction is available for these contributions, the income and distributions are normally tax free.

Huckabee said other provisions in the federal law should be adopted to benefit taxpayers and reduce the burden of complying with payment of taxes.

State law, he said, should authorize the postponement of tax-filing deadlines if there is a presidentially declared disaster or other natural disaster as determined by the governor.

In addition, an innocent-spouse provision should be adopted under state law to ensure a spouse of former spouse will not be taxed for income earned by the other spouse.

He also suggested updating those federal tax codes previously adopted. This, he said, would ensure taxpayer record-keeping and reporting requirements would be the same for state and federal tax purposes.

Under the Huckabee plan, Arkansas taxpayers would be entitled to a $6,000 retirement exemption for distribution from their IRA accounts. Currently, a $6,000 exemption is only available to those receiving retirement or disability income from an employer-sponsored retirement plan.

"Many taxpayers worked for an employer who did not sponsor a retirement plan and were left to provide for their retirement through contributions to an IRA," he wrote.

"Other taxpayers who have employer-sponsored plans lose their jobs because their employer goes through a corporate merger or downsizing. These taxpayers are frequently required to roll their employer-sponsored retirement plans into IRAs when they leave their employment."

He said these taxpayers should get the same $6,000 retirement exemptions enjoyed by other retirees.

However, doing this, Huckabee said, will cost the state $3.1 million annually, but, he added, this is a small investment and will likely reap great returns.

"When retirees move in, they add considerably to the tax base while not requiring significant added spending on police or education," he wrote. "By providing equal tax treatment for retirees, we will encourage more families to choose Arkansas as their retirement home."