Calling it an “historic moment,” Gov. Asa Hutchinson on Thursday (Aug. 11) signed into law a $400 million tax reform package as state legislators concluded their three-day special session without taking up additional issues. It is the second largest tax cut in the state’s history, according to finance officials.
The tax bills passed and signed into law will accelerate corporate and individual income tax cuts, sync up state law with a federal depreciation rule, and provide a tax credit for lower income individuals.
The state’s top tax rate will drop immediately from 5.5% to 4.9%, while the state’s top corporate tax rate will be lowered from 5.9% to 5.3%. Arkansas law will now allow businesses to deduct up to $1.08 million in depreciation expense on certain property, mirroring a portion of the federal tax code known as Section 179. The tax reform bill also provided a $150 tax credit on individuals making up to $87,000 and a $300 tax credit for couples making up to $174,000.
Additionally, lawmakers passed a $50 million appropriation to provide grants for schools to improve safety features on campuses. The accelerated tax cuts and other initiatives are being funded by the state’s $1.62 billion budget surplus from the recent fiscal year ended in July.
“This tax relief package that has just been enacted takes over $400 million from the state coffers and puts it in individual Arkansan’s pockets,” Gov. Hutchinson said. “That is a transfer of wealth from the government to the taxpayer, and it could not come at a more important time.”
“In less than eight years, we have taken the income tax rate from the highest it has ever been to the lowest it has ever been, while also growing our state reserves from zero dollars to $2 billion. We have accomplished this through a smarter, leaner, and more efficient state government,” Hutchinson said.
Democrats had hoped to add more items to the special session call including pay raises for teachers and rape and incest exceptions for abortions to state law.
The legislature quickly adjourned after it finished its tax reform and school safety initiative business leaving no path for other items to be considered.