Governor Outlines Details Of $50 Million Tax Cut Plan

Gov. Asa Hutchinson detailing his tax cut proposal during a press conference Tuesday at the Capitol.
Credit Michael Hibblen / KUAR News

Gov. Asa Hutchinson on Tuesday outlined details of his $50.5 million tax cut plan for the upcoming 90th General Assembly that he says will focus on reducing the tax burden for the bulk of the state’s lowest wage earners making less than $21,000 a year.

The tax cut plan fully outlines a measure first unveiled by Hutchinson to state lawmakers a day after the presidential election on Nov. 9, when the governor introduced his proposed balanced budget for the 91st General Assembly of nearly $5.5 billion.

In making his case Tuesday before a standing-room crowd of lawmakers, state officials and media at the Governor’s Conference Room at the State Capitol, Hutchinson in his 30-minute presentation laid out details to substantially reduce taxes for lower income Arkansans that make between zero and $20,999 annually.

The popular Republican governor said he hopes to continue the effort he began in 2015 to reduce the tax rate for wage earners in all income tax brackets, along with a well-liked proposal to exempt all retirement benefits for the state’s retirement military from being taxed.

“I know that members of the General assembly, both senators and representatives, have worked hard on this topic,” the governor said. “I’ve listened to them, many of them are here in this room, and so their decision points and ideas have been very important to me as I shaped the proposal that I wanted to present to (you).”

Hutchinson continued: “I recognize the governor has a leadership role, and I wanted to exercise that today and present my plan as to how this state should move in terms of fairness in their tax policy. But ultimately the General Assembly plays a key role, and obviously it can’t be done without their help, support and guidance.”

According to a detailed, five-page summary of his tax cut plan, an estimated 657,000 Arkansans who earn between zero and $20,000 annually will get a total tax cut of more than $46 million. Of that total, which is roughly 44% of the state’s population, nearly 120,000 taxpayers in the lowest bracket between $0 and $4,299 will be taken off the tax rolls completely.

Those who make between $4,300 and $8,399 will see their reduction in their tax rate from 2.4% to 2%, which will amount to a revenue reduction of $7.5 million. Wage earners making between $8,400 and $12,599 will see their earnings cut at a tax rate of 3%, down from the current 3.4%. That would take a $5.6 million piece out of the state’s total tax revenue.

The last low-wage tax bracket, those earnings between $12,600 and $20,999, will see their tax rate reduced by one percent from 4.4% to 3.4% if the governor’s plan is approved by the legislature. That will lower the state’s revenue collections by $10.9 million annually.

An additional $4.3 million will go toward bridging the lower income brackets with the middle income brackets to prevent the “cliff effect,” the governor said.

In addition to his tax cut proposal, Hutchinson also announced his support for exempting all retirement benefits of retired military service members from state income tax – which would cut state general revenues by $13 million. This exemption, Hutchinson said, would have to be offset with the repeal of other tax exemptions.