Governor Sarah Huckabee Sanders recently signed legislation in Arkansas that will implement significant tax cuts, with the aim of injecting approximately half a billion dollars back into the state’s economy. The new law, as reported by the Washington Examiner, includes reductions in property and income taxes for Arkansas residents.
One of the key changes is the lowering of income taxes for individuals earning over $25,000 annually, from 4.4% to 3.9%. Those earning less than $25,000 will continue to pay a lower rate of 3.4%. Additionally, corporate taxes have been reduced from 4.8% to 4.3%. Governor Sanders praised these adjustments, stating that they would significantly benefit Arkansas residents by making the state’s income tax the lowest in the South among states that tax income.
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This move comes as part of a broader legislative effort during a special session, which also saw increased funding for hunting and fishing programs, as well as a $46 million boost to the homestead tax credit. Importantly, these tax changes were made retroactive to January 1st. The anticipated impact of these tax cuts is a reduction in state revenue by $483 million in the first year and $322 million in the following year. The legislation also mandates that Arkansas set aside $290 million for potential financial emergencies.
While the tax cuts have garnered strong support from Arkansas Republicans, who hold a majority in both legislative chambers and argue that they are justified given a projected $708 million budget surplus this year, there has been criticism from Democrats. Democrats contend that the tax cuts primarily benefit higher-income earners and do not adequately address pressing social issues in the state, such as Arkansas’s high maternal mortality rate and challenges in healthcare access for vulnerable groups. Despite these concerns, Republicans maintain that essential state programs have not been cut, pointing to an overall increase of 1.76% in the state budget.
