Arkansas General Assembly cuts top individual and corporate income tax rates
The Arkansas House of Representatives on Wednesday gave final legislative approval to a plan to cut the top individual and corporate income tax rates. (Getty Images)
The Arkansas House of Representatives sent more than $100 million in cuts to the top individual and corporate income tax rates to Gov. Sarah Huckabee Sanders’ desk Wednesday.
The legislation reduces the top individual income tax rate from 4.9% to 4.7%. It decreases the top corporate income tax rate by two percentage points to 5.1%.
State budget officials expect the cuts to cost the state $186 million in revenue in fiscal 2024 and $124 million the following year.
The House passed the bill 85-12, with only Democrats opposing the tax cuts.
On the House floor, Minority Leader Tippi McCullough, D-Little Rock, said the state has too many other priorities that could use the millions in lost revenue that McCullough said would instead stay predominantly with the wealthiest individuals and companies.
House Sponsor Rep. Les Eaves, R-Searcy, said the state has been operating at a surplus and could afford to ease the tax burdens on Arkansans and businesses.
The cuts would start in the 2023 tax year, affecting tax filings in 2024. Eaves said people will immediately see more money on their paychecks because employers will start withholding less state taxes from employees’ paychecks.
Arkansans earning more than $24,300 a year, roughly 1.1 million people in the state, would see some tax reduction from Senate Bill 549, according to state officials.
Arkansans on the lower end of the tax tables would see a smaller percentage of the benefits. An analysis from the Institute on Taxation and Economic Policy published by Arkansas Advocates for Children and Families, which opposes the legislation, estimates that 80% of the cuts would go to the top 20% of earners in the state.
“We’re on a reckless path of shifting our tax burden to everyday Arkansans,” McCullough said from the House well. “The more we cut income taxes the heavier the burden to keep our government up and running.”
At a news conference last week announcing the tax-cut proposal, the governor pointed to recent tax cuts in neighboring Missouri and Mississippi and the lack of income taxes in Tennessee and Texas. Without reducing income taxes, Arkansas will lose talented people and businesses, she said.
“The simple truth is that the talent, the families and businesses we create will leave our state for greener pastures,” Sanders said. “That’s just frankly an economic reality.”
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The cuts are the latest legislative effort to reduce liability throughout the tax tables.
Lawmakers phased in cuts for lower, middle and upper level earners over the last few legislative sessions. In August, the General Assembly in special session accelerated cuts to the top corporate and individual income tax rates.
Yesterday, the House also passed a bill to abolish the state’s “throwback rule” for businesses that make untaxable income in other states. It was advanced by a Senate committee on Wednesday.
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