LITTLE ROCK — The Arkansas Senate voted 30-0 Tuesday to approve a Senate bill to exempt military retirement and survivor benefits from the state income tax.
The vote came a day after the House approved a matching House bill in a 75-14 vote. The chambers next will consider each other’s bills.
The proposed tax exemption, part of Gov. Asa Hutchinson’s policy agenda for the session, is estimated to cost the state $13.4 million a year.
The bill also includes a provision that would reduce the state’s special excise tax on soft-drink syrup, a tax that generates revenue for the state Medicaid program and that Hutchinson has said was intended originally to be temporary.
HB 1162 would transfer $5.9 million a year from general revenue to the Medicaid program to offset the tax reduction.
To offset the veterans’ tax break and the transfers to Medicaid, the bill would repeal a state income tax exemption on unemployment compensation; end the classification of candy and soft drinks as groceries so the state sales tax on them would increase from 1.5 percent to 6.5 percent; and levy a sales tax on digital downloads of movies, books and ringtones.