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Tax cut package nears final approval by Arkansas Legislature

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Michael Hibblen
/
KUAR News
Sen. Joyce Elliott, D-Little Rock, argues against the governor's tax cut proposal Wednesday as the Senate version of the bill was up for debate.

Both chambers of the Arkansas Legislature have given their approval to Gov. Asa Hutchinson’s tax cut plan. The proposal, which would reduce the top income tax rate from 5.9% to 4.9% over a four-year span, passed the Arkansas House and Senate on Wednesday by wide margins.

Speaking on the Senate floor, Sen. Jonathan Dismang, R-Beebe, explained some key aspects of the package.

“Every Arkansan that pays income taxes in the state of Arkansas will benefit from this plan. The bill will combine the low and middle tables, it will lower the top rate to 5.5% for [fiscal year 2022] and will responsibly reach 4.9%, and that’s 5.3% for corporate income taxpayers,” Dismang said. “It will automatically adjust the standard deduction to match inflation and provides for a nonrefundable $60 credit for those making $23,600.”

But Democratic lawmakers say, despite claims to the contrary, the tax cuts do not benefit most Arkansans. Rep. Denise Garner, D-Fayetteville, said savings from the tax cut package would primarily benefit the state’s wealthiest residents.

“In this plan, 20% of Arkansas earners will receive 73% of the income tax cuts. Those lucky enough to be in Arkansas’ 1%, those making $500,000 and more, will see their taxes decrease on average by more than $10,000. But most Arkansans will only see the decrease of $40 to $60,” Garner said.

Lawmakers also spoke against lowering corporate tax rates that could apply to foreign and out-of-state companies. The bill passed the Senate on a vote of 30 to 4, while an identical bill also passed the House.

The bill’s primary House sponsor, Rep. John Maddox, R-Mena, said the tax cuts reflect an investment in the future of the state.

“We’re betting on Arkansas, we’re betting on growth, we’re betting on the continued inbound migration that we’ve all seen. The last thing I saw is we’re number 10 in the country in people choosing to move here,” Maddox said.

But Democratic Sen. Joyce Elliott of Little Rock argued the nearly $500 million the state would lose because of the tax cuts would be better spent funding social services for children and people with disabilities.

“If we’re going to talk about fairness in terms of ‘We’ve got to have these taxes like this to lure these people to Arkansas,’ they will come just like they come right now when we hand them out money… but those things that I just talked about that we are not funding, that is really what will get people to be in Arkansas,” Elliott said.

ECONOMIC DEVELOPMENT ARGUMENT

As members of the House and Senate were debating the tax cut package, members of the Democratic House Caucus and the state party chair held a press conference to share their concerns about the proposal.

Gov. Hutchinson has argued lowering income tax rates is needed to make Arkansas more competitive with other states in attracting new businesses and talent. He has noted many states have lower or no income taxes, which he said is a consideration by companies when look for where to build new facilities.

The tax cut would be funded with a $1.2 billion budget surplus Arkansas has built up in recent years by revenue coming in above forecast.

But state Democratic Party Chair Grant Tennille, who previously led the Arkansas Economic Development Commission (AEDC) under Governor Mike Beebe, told reporters Wednesday he has his doubts.

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Democratic Party of Arkansas Chair Grant Tennille speaks to reporters during a press conference Wednesday surrounded by Rep. Tippi McCullough of Little Rock (left) and Rep. Megan Godfrey of Springdale.

“I don’t believe this money will come back into the Arkansas economy the way they’re advertising. I think if you really wanted to do that, you would do what has been suggested to them for years by [Department of Finance and Administration] employees and AEDC employees,” Tennille said.

“Take some of this surplus, put it at AEDC and say it is earmarked for starting businesses in Arkansas and this money will be given out as a reward and an inducement to those that want to build businesses here.”

The tax cut package could face final votes in the House and Senate by Thursday.

TEXAS-STYLE ABORTION BILL

Lawmakers also took action Wednesday to implement a near-total ban on abortion in the state. Resolutions filed on Wednesday aim to extend the current legislative session by 15 days for the sole purpose of voting on identical versions of an abortion ban.

The bills, filed by Sen. Jason Rapert, R-Conway, and Rep. Mary Bentley, R-Perryville, would ban the procedure except to save the life of a parent. Lawmakers could take action to extend the session as soon as Thursday.

Daniel Breen is a Little Rock-based reporter, anchor and producer for KUAR.
Michael Hibblen is News Director of UA Little Rock Public Radio. A 34-year radio veteran, he oversees the KUAR News staff, plans coverage and edits stories while also reporting and anchoring newscasts.