Upcoming legislative session agenda already being set

As the Arkansas State Legislature prepares for its 2025 session, several key issues are expected to take center stage. Legislators will navigate a complex landscape while responding to economic pressures and constituent demands.

With so many items for legislators to address in 2025, the following are the most likely prominent topics to shape the upcoming session.

First are tax cuts, likely to be paired with a wait-and-see approach. Although tax revenue reports have shown a 2.3% reduction compared to last year, Arkansas remains fiscally stable, with net available revenue 1% above forecast. These numbers suggest that while legislators may consider tax cuts, there could be hesitation in passing significant reductions during the regular session. As seen in previous sessions, the General Assembly may wait until a special session to make final decisions once the state’s fiscal picture becomes more apparent. However, a reduction to at least a 3.5% top marginal income tax rate remains likely sometime soon.

Next is the complete elimination of the grocery tax, which is gaining support in the General Assembly. The state tax rate on food and food ingredients is now 1/8th of a cent, which does not include prepared food. The collected tax generates approximately $10 million that goes to the state’s Conservation Fund, divided between Arkansas Game and Fish, the Department of Heritage, and Arkansas Parks and Tourism. Because this tax was established through a constitutional amendment, lawmakers will need to navigate these legal hurdles carefully if they wish to proceed with the elimination of this tax.

Shifting focus to another significant topic, the phase-out of the “throwback rule” is gaining momentum, especially among the business community, as many are ready for its curtain call. The “throwback rule” requires that sales in other states or to the federal government are not taxable, must be “thrown back” to Arkansas for tax collection. As you may remember, the 93rd General Assembly passed legislation to phase out the throwback rule over seven years. There is now significant momentum to expedite this phase-out, driven by a sense of urgency from business groups and some lawmakers. Accelerating the process would likely garner strong support from a business community eager to see the reduction in corporate tax burdens happen sooner.

Finally, if you are a senior citizen, there may be some relief on the horizon for your wallet regarding property taxes. Legislators may propose bills to reduce the property tax burden on older Arkansans. However, any adjustments in this area could face constitutional challenges, especially if they require changes to existing property tax frameworks. Additionally, the Homestead Tax Credit may again be up for debate as lawmakers explore ways to offer further relief to homeowners.

Outside of these priorities, a range of other issues are expected to arise during the 2025 session, reflecting the diverse concerns of legislators. These include:
• Learns Act Funding Issues: Education funding, mainly related to the Learns Act, will be scrutinized as lawmakers debate how best to support the state’s education system.

• Prison Funding and Reform: With rising incarceration rates and aging facilities, prison reform and funding will likely be a significant topic.

• Soda Tax: As in previous general assemblies, another bill to eliminate the soda tax could likely be introduced.

• Mental Health Services: Mental health remains a growing priority, with lawmakers discussing ways to increase funding and access to services across the state.

As Arkansas moves into the new year, economic and constitutional factors will play pivotal roles in shaping the legislative agenda.

Editor’s note: Joe Jett is director of Business Strategies and Corporate Development for Rose Group Advisors and is a former state representative who chaired the House Revenue & Tax Committee. The opinions expressed are those of the author.