Legislature Approves Record Income Tax Cuts During Special Session
LITTLE ROCK – The legislature completed a three-day special session in which it passed reductions in state income taxes that will save Arkansas families and businesses almost $500 million a year when they take effect.
Taxpayers from all income levels will benefit from the cuts in individual income taxes and increased credits. Corporate income taxes also will go down.
More than 535,000 people will get a $60 credit on their income taxes. They are in low-income tax brackets and represent about 28 percent of the state’s population. About 104,000 low-income taxpayers will not have to pay any state income taxes.
The new law lowers the top income tax rate over the next four years, from 5.9 percent to 4.9 percent.
The top rate for corporate income taxes will gradually decrease to 5.3 percent in 2025.
Filing will be simpler for taxpayers in the low and middle income brackets because the new law consolidates their tax tables into one.
The savings for Arkansas families will grow over time as the various provisions of the new tax law go into effect. Next year the savings will be $135 million, in 2023 they will be $307 million, in 2024 they will be $383 million and in 2025 they will be $459 million.
Beginning in 2026 Arkansas families and businesses will save more than $497 million a year in state income taxes.
There are “trigger” provisions in the bill that protect state revenue in the event of a sudden and unexpected downturn in the economy. That provision would slow the pace of tax cuts as they are being phased in, to make sure that essential services such as schools, health care and prisons are adequately funded.
Also during the special session, the legislature approved tax credits and other incentives to help the state recruit a $3 billion steel mill in Mississippi County, proposed by U.S. Steel.
It would create about 900 jobs, of which 700 would have salaries of $120,000 a year. About 200 of the new jobs will have salaries of $60,000 a year.
One of the housekeeping measures approved during the special session changes the terms of commissioners on a newly-created Tax Appeals Commission. The legislature created the appeals commission earlier this year, during the regular session.
A bill passed during the special session makes sure that the terms of the initial members will expire at staggered times, instead of all of them leaving the commission at the same time.
Legislators completely repealed a bill enacted earlier this year that would have set up rebates for people who purchase insulin. It had the unintended consequence of raising costs for health coverage, so lawmakers repealed it during the special session.
Legislators said they would continue looking for ways to hold down inflation and control increases in the wholesale price of insulin.
With the completion of the special session, lawmakers are not schedule to return to the Capitol until the fiscal session, which convenes in February.
Traditionally, during fiscal sessions the legislature only considers appropriations that set spending levels for state agencies. However, there is a rarely-used parliamentary mechanism that allows for introduction of non-budget bills.