Gov. Asa Hutchinson wants to see a further cut in the state’s income tax, but he’s avoiding a position on a potential proposal to eliminate the tax in eight years. The governor also said a special session call for tax reform still lacks consensus and he’s not on a specific timetable to reconvene lawmakers after they finish their regular session business at the end of the month.
Hutchinson offered his comments on Sunday’s (Sept. 19) Talk Business & Politics TV program.
State legislators are set to complete their regular session business when they come to the capitol Sept. 29 to finalize a new Congressional district map, part of their duties for the once-a-decade Census. Some lawmakers want to consider other measures such as legislation similar to a Texas law that eliminates abortion and pushing back on a proposed federal rule to require vaccines in businesses with more than 100 employees.
Hutchinson will be pressured to add those items to a special session call if the state legislature is restricted from considering them in its regular session. He said he doesn’t think the Arkansas General Assembly can take up those issues in its regular session business.
“The answer is no. I don’t think they can bring anything but redistricting up in the extended regular session,” he said. “Our constitution provides for a limited session and there’s an exception that they can come back for redistricting purposes.”
“When you get to the special session that we may have for the primary purpose of adding additional income tax cuts, then if they have I believe it is a two-thirds vote, a supermajority, they can add additional items to it,” he added.
Hutchinson said he doesn’t want to call a special session to deal with tax reform until a legislative consensus is formed. Presently, there are conversations between the executive and legislative branches on tax proposals, but a final plan has not been decided.
“I don’t want to call the session until we have a consensus on it. We work through all of this process. We haven’t completed that yet. So they’re going to have the redistricting regular session at the end of September and then we’ll probably look into October if we can build the consensus in terms of the special session for the tax reduction,” Hutchinson said. “I’m not bound by any timeframe.”
Hutchinson and lawmakers have been steadily reducing income taxes during his two terms as governor. He has successfully passed lower- and middle-income tax cuts and reduced the top tax rate from 7% to 5.9%. The governor wants to lower that top rate to 5.5% based on the state’s current revenue situation, which includes a $1 billion surplus.
He’s open to an income tax reduction to 4.9% and reforming the tax brackets to keep workers from being penalized with significantly higher taxes when they move across a certain income threshold.
Hutchinson’s plan to lower the top tax rate to 5.5% has an annual price tag of approximately $150 million in reduced state revenue, or $1.5 billion over 10 years. He said he wants to be careful when reducing taxes in order to meet obligations for public education and other essential state services.
Two tax cut proposals that have surfaced in recent months involve lowering the corporate income tax and eliminating the individual income tax completely in eight years.
The Arkansas State Chamber of Commerce has floated the idea of lowering the corporate income tax rate as individual income taxes fall. Gov. Hutchinson says he’s open to discussions on the topic, but it is not his top priority.
“My priority has been the individual income tax to lower, but there’s a lot of support for letting our pattern of lowering taxes follow with the reduction of the corporate income tax about a year later. So we’ll have some more discussions on that, but right now, that’s not on the agenda. I want to look more at the budget numbers to see if the possibilities are to do more,” he said.
On a proposal floated by Attorney General Leslie Rutledge, a Republican candidate for Arkansas governor, to eliminate the state’s individual income tax by 2030, Hutchinson said he’s staying out of that debate.
“In terms of eliminating the state income tax, that’s not going to happen while I’m governor. And I’ll leave that to the candidates that are running in the next election to debate that issue and determine the path after I finish my time as governor,” he said. “I think you can lower it gradually, but I don’t know how far you can go. And I don’t want to raise other taxes.”
You can watch the governor’s full interview in the video below in which he discusses Afghan refugees locating in Arkansas, the first rice sale to China, and improving numbers on COVID-19.