Gov. Hutchinson: Drop income tax rate to 5%

The state’s top income tax rate ultimately should be about 5%, Gov. Asa Hutchinson said Tuesday.

Meanwhile, Hutchinson expressed support for a new outcomes-based funding formula for higher education that will replace the state’s current enrollment-based formula. The state’s Higher Education Coordinating Board will be presented the new formula for consideration Friday.

Speaking to Rotary Club 99 in downtown Little Rock, Hutchinson said the 5% income tax rate “may or may not happen while I’m governor, but we have to set those goals, and we have to be competitive, and I think that gives us a competitive rate with our more competitive property taxes and so on.”

He said the current tax rates make the state less competitive against states like Florida, which doesn’t have an income tax.

He said he would be cautious in the next legislative session with tax cuts and won’t know what the state can do until budget numbers arrive in October.

The proposed new higher education funding formula is an outcomes-based model focused on program completion at the state’s four-year and two-year colleges and universities. The current model “rewards growth but does not always reward excellence,” Hutchinson said.

Hutchinson said the state’s goal is to move from the current 43% program completion of certificates and degrees to 60% program completion by 2025.

The formula would have to be adopted by the coordinating board and the Legislature when it meets next year. If that happens, Arkansas would become the fifth state with a 100% outcomes-based formula, he said.

“This is not an easy political lift,” Hutchinson said.

Hutchinson later told reporters that the state needs to reward success by increasing degree attainment, reducing remediation, and reducing the cost of education. The formula would need to be structured so that schools do not have an incentive to accept only students most likely to complete their programs.

Hutchinson said that a special election will be held in House District 9 concurrently with the general election in November to replace Rep. Sheilla Lampkin, D-Monticello, who died Saturday. Voters in her district will vote in two elections on the same ballot – one to complete her term, and one to start the next term. Hutchinson ordered U.S. and state flags to fly at half-mast in honor of Lampkin until sunset on July 27.

Earlier Tuesday, LeAnne Pittman Burch, a recently retired brigadier general in the U.S. Army Reserves and Arkansas Department of Human Services attorney, announced that she would seek the District 9 seat.

In response to a question from the audience, Hutchinson said the British exit from the European Union provides an opportunity because the British will be negotiating separate trade agreements with the United States. Meanwhile, the European Union will be in a weakened negotiating position without the United Kingdom as a member.

Hutchinson said that, economically, Arkansas is going in the right direction. The state has a 3.8% unemployment rate, the lowest in history, which he said was fact-checked by a Washington publication after he mentioned it at the Republican National Convention in Cleveland. The state has created 54,000 jobs since he became governor, and the Arkansas Economic Development Commission has worked with 161 new and expanding companies that have created 6,600 jobs with a $2.6 billion investment and an average wage of more than $19. The state’s per capita income is growing faster than the national average. State government had a $177 million surplus this year.

Hutchinson spoke hours after presiding over a naturalization ceremony welcoming 101 new American citizens ages 19-80 and coming from 37 different countries.