The $124 million income tax cut plan approved by Arkansas lawmakers

Little Rock, Arkansas – A plan to reduce individual and corporate income taxes in Arkansas by $124 million annually was endorsed by lawmakers on Wednesday by Republican governor Sarah Huckabee Sanders and legislative leaders.

The legislation that seeks for lowering the top individual income tax rate from 4.9% to 4.7% was approved by the majority-Republican House. Additionally, the top corporate income tax rate is decreased from 5.3% to 5.1% in the bill, which will now be sent to Sanders’ desk.

The tax reduction is about to go into effect since Arkansas’ recent revenue surprises exceeded expectations. The state had a record $1.6 billion surplus at the end of the previous fiscal year. The state’s fiscal year’s total revenue has so far exceeded expectations by $306 million.

“As you know we’re building a sizable surplus, so that’s what that will do, eat into that a bit,” Republican Rep. Les Eaves, the bill’s House sponsor, said before the vote.

According to state finance authorities, the idea would result in a reduction in taxes for 1.1 million taxpayers who earn more than $24,300 annually. The state’s income tax should be gradually eliminated, according to Sanders, who entered office in January. Sanders’ Republican predecessor, former Governor Asa Hutchinson, and the majority-GOP Legislature implemented a number of cuts over the previous few years.

However, critics of the tax cut claim that it will unfairly favor wealthy taxpayers and comes at a time when other state priorities have been underfunded recently.

“We’re on a reckless path of shifting our tax burden to everyday Arkansans,” said Democratic Rep. Tippi McCullough, the House minority leader. “The more we cut income taxes, the heavier the burden to keep our government up and running.”

The Department of Finance and Administration estimated that the tax decrease would cost $186 million in its first year because it will be implemented this year. One of the final significant things on the schedule is the tax cut, as House leaders seek to complete this year’s session by Friday.