All eyes on a state tax cut

In the General Election on Nov. 2, 2010, Arkansas voters approved Constitutional Amendment 86, which required the General Assembly to meet annually, with even-numbered years designated as the fiscal session. The primary focus of the fiscal session is on budget matters and appropriation bills. 

The supporters of Amendment 86 sought to improve budget oversight and provide greater legislative review of the state’s finances. However, a bill outside of budget or fiscal matters can be brought before the members of the General Assembly with a two-thirds vote in each chamber.

As we approach the 2026 Fiscal Session, set to convene on April 8, policymakers have Arkansas well-positioned. With strong revenue collections, a proven track record of fiscal responsibility, and momentum from a productive 2025 regular session, Arkansas is the envy of many other states.

Fiscal year 2026 shows strong revenue recovery, with first-half collections at $3.437 billion — a 2.2% increase over last year and $103 million above forecast. This rebound reverses a 3.2% drop in fiscal year 2025, which was due to the absorption of three income tax cuts between 2023 and 2024.

The regular session from last year was productive by any measure — 1,026 bills signed into law, addressing everything from maternal health to higher education reform. But several items remain on the table and will likely resurface in the 96th General Assembly, including funding for the Education Freedom Accounts and the prison issue, among others.

If you recall, the funding for the new prison in Franklin County failed a total of five times in the Senate last regular session. The bill proposed up to $750 million for a 3,000-bed prison. The concerns raised by legislators and Franklin County residents about transparency, infrastructure, and staffing were the deciding factors in the bill’s failure to pass, even as members acknowledged the very real problem of county jail overcrowding.

As the fiscal session approaches, lawmakers will get a head start on fiscal matters by holding budget hearings March 4-6. These hearings will focus on reviewing agency budget requests.

Legislative leadership has indicated that their goal is to conclude the fiscal session in three weeks, but more realistically, to adjourn before the end of the fourth week. They had originally planned to address the tax-cut issue at the end of the fiscal session, but now intend to hold a special session afterward to do so.

We look for only tax issues at this time to be on the call for the special session, and that will be the income tax cuts and tax table streamlining. The goal is to reduce the top marginal rate from 3.9% to 3.49%. But everything from 0.2% to 0.5% is on the table.

Speaking of tables, discussions are underway among leadership on how to streamline Arkansas tax tables. We would not be surprised to see the personal income tax tables adjusted and streamlined in the potential special session.

Only the governor can decide what will be placed on the call for the special session. Historically, a governor will only call a special session if they feel they have the necessary votes to pass what has been placed on the call. Of course, as always in politics, they have been exceptions to that unwritten rule.

On a side note, this will be the final year in office for Rep. Lane Jean, R-Magnolia. Jean has served as House Budget co-chair for 12 years. He has been a stalwart in state budget and finance and is extremely well respected and liked. He has served the state of Arkansas well and will be missed.

With the 2026 fiscal session around the corner, Arkansas has solid revenue, a strong credit rating, and a track record of disciplined budgeting. Members face the responsibility of preserving long-term fiscal health. The decision lawmakers will make in the coming weeks will shape the state’s ability to invest in its future while preserving its long-term fiscal health.

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.