Natural State News

Arkansas Gov. Asa Hutchinson proposed a plan to reduce the state’s top individual tax rate from 5.9% to 5.5%, as the state sees an increase in jobs over the last year.

In August 2020, Arkansas’ unemployment rate sat at 6.5%, according to an article by Talk Business & Politics. One year later, in August 2021, the unemployment rate was 4.2% and tourism jobs specifically jumped nearly 8%.

“That’s exciting whenever coming through a pandemic, that we have a good economy coming in Arkansas, and that we can look at tax reductions even during this time because of a surplus we’ve built and because of the growing economy that we have in Arkansas,” Hutchinson said, according to KNWA.

A number of special sessions, which began Sept. 29, will take place in the state. The first will not touch on the tax reductions, instead discussing redistricting in the state based on census data release in August. 

“That will be part of a second special session in mid-October,” Hutchinson said.

Though the tax goal is currently 5.5%, some lawmakers in the state House of Representatives want triggers in place to eventually get it down to 4.9%, the Arkansas Democrat Gazette reported. They will also consider a proposal from Sen. Jonathan Dismang (R-Beebe) to whittle down the number of tax brackets from three to two, by merging the lower and middle tables into one. With this, the cutoff between the higher and lower tax bracket would be $82,000.

“As long as the triggers are safe and does not jeopardize our education and the other essential services of the state, I am OK with that," Hutchinson said.

The tax cut discussion began last week. One presentation at a joint meeting of the House and Senate Revenue and Taxation Committees showed evidence that the pandemic reduced state revenue over what was expected, the Arkansas Times reported. Another estimated that the cost of the tax cuts to the state would be $2.6 billion over the next ten years.

Legislators cited the state's reserve fund that would provide relief in the event of tax cuts, but Sen. Jimmy Hickey (R-Texarkana) made note of the fact that the fund was not created for that purpose, the Arkansas Times reported. Other senators noted the benefits of having a low income tax in the state as a method to attract individuals and businesses while acquiring the tax dollars by other means.

The state’s speedy recovery from the restrictions of the pandemic has been the main reason affording Arkansas the opportunity to reduce the income tax while attracting more residents and businesses, Natural State News reported. 

Dismang and Sen. Trent Garner (R-El Dorado) did not respond to requests for comment in time for the publication of this story.