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Arkansas lawmakers approve $124 million income tax cut plan

Internal Revenue Service taxes forms are seen on Feb. 13, 2019.
Keith Srakocic
Internal Revenue Service taxes forms are seen on Feb. 13, 2019.

Arkansas lawmakers on Wednesday approved a plan by Republican Gov. Sarah Huckabee Sanders and legislative leaders to cut individual and corporate income taxes by $124 million a year.

The majority-Republican House approved the legislation that calls for cutting the top individual income tax rate to 4.7% from 4.9%. The bill, which now heads to Sanders’ desk, also cuts the top corporate income tax rate to 5.1% from 5.3%.

The tax cut is poised to take effect as Arkansas’ revenues have come in higher than expected in recent years. The state ended last fiscal year with a record $1.6 billion surplus. The state’s revenue for the fiscal year so far has come in $306 million higher than expected.

“As you know we’re building a sizable surplus, so that’s what that will do, eat into that a bit,” Republican Rep. Les Eaves, the bill’s House sponsor, said before the vote.

State finance officials said that under the proposal, 1.1 million taxpayers who make more than $24,300 a year would receive a cut. Sanders, who took office in January, has called for phasing out the state’s income tax. Over the past several years, Sanders’ Republican predecessor, former Gov. Asa Hutchinson, and the majority-GOP Legislature enacted a series of cuts.

But opponents of the tax cut have said it will disproportionately benefit wealthier taxpayers and comes as other needs in the state have been underfunded in recent years.

“We’re on a reckless path of shifting our tax burden to everyday Arkansans,” said Democratic Rep. Tippi McCullough, the House minority leader. “The more we cut income taxes, the heavier the burden to keep our government up and running.”

The tax cut would cost $186 million in its first year because it will take effect this year, the Department of Finance and Administration said. The tax cut is one of the last major items on the agenda as legislative leaders hope to wrap up this year’s session by Friday.

Andrew DeMillo is the Capitol Correspondent for the Little Rock bureau of The Associated Press.