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Arkansas governor outlines tax cut proposals, but delays special session

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Gov. Asa Hutchinson takes a question from a reporter during Tuesday's press conference.

Gov. Asa Hutchinson proposed more than $300 million in income tax breaks Tuesday, but said there will not be a special session starting Oct. 25. He hopes a special session to discuss tax cuts can be called before Thanksgiving, but said no timetable has been set.

Several state lawmakers are expected to try and bring up other issues such as abortion restrictions, and Hutchinson said he wants to vet the legality of those issues being brought up in the special session.

“Everyone knows I’ve been in favor of lowering the individual income tax rate in Arkansas,” the governor said.

Hutchinson offered a three-phase plan. Phase one would increase the tax credit for low-income earners who make about $22,900 or less, from $29 to $60. It would cost $19.6 million annually.

Phase two would combine lower and middle-class income tax brackets and would create a total reduction of $132.7 million in taxes for this group.

The third phase would drop the upper income tax rate from 5.9% next year to 5.5% the following year at a cost of about $109.6 million. The rate would then drop to 5.3% the following year costing the state another $27.4 million in annual revenues.

Once the entire plan is enacted, it would cost $321 million per year, Hutchinson said. The bulk of the tax cuts would impact those making $82,000 or less per year, he added.

“That’s a huge tax reduction,” he said.

Arkansas has a projected budget surplus of nearly $1 billion and new projections that are slated to be released this week will push that estimate even higher, Hutchinson added. In the state’s most recent revenue report, tax collections were nearly $250 million above forecast.

The governor said he has not ruled out dropping the top rate to 4.9% or instituting a corporate tax cut. The only way Hutchinson would consider those changes, he said, is if it wouldn’t impact the fiscal health of the state or necessary programs.

COVID-19 cases continue to decline, with the number of total active cases Tuesday at 5,853, a drop of 99 from Monday. There was a total of 661 new cases and another 19 deaths, bringing the total death toll to 8,221.

There has been a steady decline in the number of cases in the public schools, Arkansas Secretary of Education Johnny Key said. The state has about 1,050 active cases in grades K-12.

Due to the drop in cases, Hutchinson said the state would make one significant change to the Centers for Disease Control quarantine requirements that are being used.

Students who are within six feet for 15 minutes or more with someone positive for COVID-19 are required to follow quarantine protocols. The number has now been changed to three feet, Arkansas Secretary of Health Dr. Jose Romero said. There has been an enormous number of complaints from school administrators about the number of students in quarantine and Hutchinson said it has become an education issue.

However if the case number starts to spike again, the six foot distance rule will be put back into place. Romero also said he expects vaccines for kids ages 5-11 will be made available by the first week of next month. For those who don’t want to be stuck in quarantine, there is one simple procedure to follow, he added.

“Vaccination is the best way to avoid quarantine,” Romero said.