Legislature Cuts Income Taxes for Millions of Arkansans
LITTLE ROCK – The legislature concluded a quick, three-day special session after approving income tax cuts that will save 1.6 million Arkansas taxpayers about $500 million.
The tax savings will come mainly from moving up the effective date of previously adopted tax reductions. Last December the legislature lowered the top income tax rate over four years, so that it would be 4.9 percent in 2025.
Thanks to legislation enacted during the special session, that reduction becomes effective this year.
In similar fashion, the legislature moved up the effective date of previously approved tax reductions that lowered the top rate for corporations over three years, to 5.3 percent in 2025. The top rate will take effect in 2023. For tax year 2022 the top rate will remain at 5.9 percent.
Moving up the effective date will save businesses in Arkansas about $18.6 million this fiscal year. The savings increase the following year to $27.8 million.
Another provision enacted during the special session will save Arkansas businesses $29.4 million this year. The legislature approved a change in how they can claim deductions for depreciation and expensing of property, making the Arkansas tax code similar to depreciation schedules in section 179 of federal tax codes.
This will allow Arkansas businesses to claim deductions for the purchase of new or used equipment, up to about $1 million, in a single year. Previously, state tax law limited the amount that could be deducted and required deductions to be spread out over the life of the equipment.
Individuals with incomes up to $87,000 will get a $150 nonrefundable tax credit. Married taxpayers who file separately may each claim a $150 credit. Married taxpayers filing jointly with net income up to $174,000 will receive a $300 nonrefundable income tax credit.
Those income tax credits will save Arkansas families more than $156 million in Fiscal Year 2023.
Even after passage of the tax cuts, state government is on course to have a budget surplus of about $400 million at the end of the fiscal year, according to the bill’s sponsors.
Also during the special session, the legislature authorized the state Education Department to use $50 million from reserve funds for grants to school districts that need school safety upgrades. If necessary, the legislature will consider additional funding of school safety measures during the 2023 regular session, which begins in January.
The Arkansas School Safety Commission is finalizing a list of recommendations to protect students and staff in the event of a school shooter.
The commission recommends that an armed school resources officer be present in all buildings at all times when there are students.
Another recommendation is that all school doors be locked, with electronic controls. Teachers should be able to lock classroom doors from the inside, the commission recommended.
Security cameras, accessible to school staff and law enforcement, as well as two-way radios to connect school personnel with local police officers, are recommended.
Some lawmakers wanted to consider pay raises for teachers. However, the governor did not put that issue on the call for the special session so salary increases for teachers will be an issue during the 2023 regular session.