Income Taxes to Go Down in 2020
LITTLE ROCK – During the regular session lawmakers balanced the budget of state government while cutting taxes and reducing the number of state agencies.
Act 182 of 2019 is an income tax reduction that will save Arkansas taxpayers $97 million a year when fully in effect. About 579,000 taxpayers, those with net taxable incomes greater than $38,200, will see a reduction in their income taxes.
The act also simplifies the tax tables used for calculating your personal income taxes.
Act 808 of 2019 increases the homestead property tax credit by $25, from $350 to $375. It will benefit more than 716,000 property owners by $12.5 million a year.
Act 822 of 2019 lowers tax rates for businesses over the next few years. By 2023 it will save them $40 million a year.
The act also extends a company's ability to carry forward net operating losses. The longer carry forward period will gradually extend to 10 years. Now it is five years. When the new provisions are in full effect, the savings to Arkansas businesses will grow by an additional $70 million a year.
Act 910 of 2019 restructured state government, reducing the number of cabinet-level agencies from 42 to 15. Savings resulting from more efficient operations of state government are estimated to be $15 million.
The state collected more than $7.1 billion last year in sales taxes, income taxes and special taxes on tobacco, alcohol and gambling.
The total available for services was about $5.6 billion after the state made refunds and bond payments, and set aside $360 million for the Educational Excellence and Educational Adequacy funds.
The legislature approved a highway program in two parts. Act 416 of 2019 levies a new wholesale sales tax on gasoline and diesel, which will result in an additional 3 cents a gallon on gas and 6 cents on diesel. The new state rate for gasoline will be 24.5 cents a gallon, and for diesel it will be 28.5 cents.
When fully in effect, in Fiscal Year 2021, this new wholesale sales tax will generate $59 million a year for state highway projects and $12.6 million each a year for both cities and counties. Increases from one year to the next will be limited to 0.1 percent per gallon.
Also, $35 million from new casino taxes will be transferred to state highway projects. The act increases annual registration fees on electric vehicles to $200 and hybrid vehicles to $100. This will generate $1.9 million a year for state highway projects.
The other component of the highway program is Issue One, which the legislature referred to the November general election ballot.
If Arkansas voters approve Issue One, it would make permanent the half-cent sales tax for highway projects that voters approved in 2012. It raised the state sales tax from 6 to 6.5 percent and originally was promoted as a temporary, 10-year tax. It took effect in 2013 and is scheduled to expire in 2023.
The half-cent will generate $293.7 million a year. Cities and counties will each receive $43 million, and the state Transportation Department will get the remaining $205 million each year.