Reduced taxes during special sessions may increase some Arkansans’ paychecks

Little Rock, Arkansas – On Tuesday, June 12, Governor Sanders convened a special session of the Arkansas Legislature, putting a number of important issues on the schedule. Reducing income and real estate taxes is one of those things.

If these taxes are lowered, you will see changes, according to Dr. Michael Pakko, Chief Economist and State Economic Forecaster at the Arkansas Economic Development Institute.

“When the income tax rate is cut, that directly affects people’s take-home pay,” said Pakko.

He continued, “Probably most people would see an increase in their paycheck due to smaller withholding from tax on an ordinary basis, and if not then, then at least they may see a bigger refund at the end of the tax year next April.”

Reducing property taxes will also have a discernible advantage, according to Pakko.

“There is also a proposal to raise the Homestead Tax Credit from $425 to $500 so that again would be a benefit that people would see when they pay their property taxes,” said Pakko.

But enough about numbers. What is the true meaning of this?
Pakko presented an illustration.

“Just some back-of-the-envelope calculations, a family with a taxable income of about $50,000 is likely to see over $200 in tax relief over the course of the year,” Pakko said. “That does not amount to much on a weekly or even monthly basis but it is a little bit and every little bit helps.”

The $700 million surplus in Arkansas makes the planned tax cuts possible, but some argue that funds would be better used on initiatives that directly benefit Arkansans.

“Critics of the plan suggest that some government programs are underfunded and that the money should be devoted to more government spending rather than tax cuts,” said Pakko. “Others might say the tax cuts could be taken in other places but that is the political process. That is the kind of deals that are hammered out in the legislature.”