Governor, legislative leaders agree on income tax cut

Gov. Sarah Sanders and state legislative leaders on Thursday (March 30) agreed on a $124 million income tax cut that will go into effect this year, if approved.

SB549, filed by Rep. Les Eaves, R-Searcy, chair of the House Revenue and Tax Committee, and Sen. Jonathan Dismang, R-Beebe, co-chair of the Joint Budget Committee and a member of the Senate Revenue and Tax Committee, filed the bill Thursday.

The measure reduces the top individual income tax rate from 4.9% to 4.7% in the current calendar year. It also lowers the top corporate income tax rate from 5.3% to 5.1%. For individuals, the tax break kicks in for anyone making more than $24,300 annually and is expected to affect 1.1 million Arkansas taxpayers.

The estimated fiscal impact to the state is $124 million. Roughly $100 million will count towards individual income tax relief, while the other $24 million will impact corporate taxes.

Sanders was flanked by the bill’s sponsors and legislative leaders from each chamber, including House Speaker Matthew Shepherd, R-El Dorado.

“Frankly, Arkansans have been under Joe Biden’s reckless spending spree and inflation and the rising cost of gas. Arkansans need relief fast,” Sanders said.

She noted that Texas and Tennessee do not have state income taxes and Missouri and Mississippi have lowered their income tax rates in recent months.

“In 2011, we fought tooth-and-nail for tax relief,” Speaker Shepherd said, referring to a hard-fought $35 million tax break over a decade ago. “Today, we’re building off some of the previous success we’ve had.”

Randy Zook, CEO of the Arkansas State Chamber of Commerce and Associated Industries of Arkansas, said the tax cuts will continue to make Arkansas competitive.

“This reduction makes Arkansas more competitive with surrounding states for capital investment and jobs. The resulting economic growth generates a higher standard of living and stronger families,” Zook said.

“Proposals to cut the top income tax rate simply don’t help most Arkansans in any substantial way. We still have to pay to educate our kids, have safe roads to drive on, and provide the access to broadband our rural areas desperately need. If you look at key measurements of child well-being in Arkansas, it’s clear we need to make critical investments to improve outcomes for kids. This proposal recklessly ties our hands to give a boost to Arkansas’ top income earners and wealthy corporations,” said Bruno Showers, senior policy analyst for Arkansas Advocates for Children and Families.

Sen. Dismang said that other potential targeted tax cuts are being discussed, but no consensus has been agreed upon by members.

Since 2015, in Gov. Asa Hutchinson’s first term as governor, the state has cut its top individual income tax rate from 7% to the present 4.9%. The new bill, if approved by the legislature, would be the first income tax cut for the Sanders’ administration.

The bill has not been assigned to committee yet, but will most likely be heard early next week in the Senate Revenue and Tax Committee.