From the historic hallways of the most beautiful state Capitol in our nation, this is Senator Keith Ingram.
Arkansas rang in the new year with the largest single reduction in state income taxes we’ve seen in the state’s history.
Effective January 1, taxpayers in the top income bracket will see their state income taxes go down from 5.9 to 5.5 percent.
Taxpayers in the low and middle-income brackets will benefit from standard deductions that track the cost-of-living index. Low-income wage earners will get a non-refundable credit.
The legislature approved the tax cut bill in the December special session. One of the selling points was that it also simplifies the tax code for average wage earners.
Basically, it reduces the number of tax tables from three to two.
Another benefit of the legislation is that it should boost our efforts to create jobs in Arkansas.
Economic developers say that they’ll have more success recruiting industries to Arkansas because our tax code is now more competitive with neighboring states.
Because of tax cuts approved in the 2019 session, the top rate for corporate income taxes was going down this year anyway, from 6.2 to 5.9 percent.
In the special session we lowered it even more. It will go down to 5.7 percent next year, and in 2024 it will go down to 5.5 percent.
The top rate for high-income individual taxpayers will go down to 5.3 percent next year, then to 5.1 percent the following year and finally to 4.9 percent in 2025.
A group of my colleagues were reluctant to agree with such a large reduction in revenue, without assurances that we weren’t going to jeopardize vital state services.
That’s why there is an important provision in the legislation with a so-called “trigger mechanism.”
If we experience a sharp economic downtown that lowers state revenue, the trigger mechanism will postpone the effective date of tax cuts, to give the economy time to recover.
A drop in revenue would jeopardize the state’s ability to fund its obligations. For example, under the Arkansas Constitution, the state must provide an adequate education to all children.
We have a moral obligation to care for senior citizens and people with disabilities.
Our prosperity depends on law enforcement and a fully functioning judicial system, fully-staffed prison units, and a probation and parole system that protects us from dangerous criminals.
All those vital services cost money. The state’s total general revenue budget is close to $6 billion a year.
To give you an idea of how much we cut taxes, when all the various provisions take effect, they will add up to $500 million. That is eight percent of the state’s entire general revenue budget.
All things considered, Arkansas enters 2022 in excellent fiscal condition. That’s because state government operates under a conservative, balanced budget.
From the Capitol, it is always my great honor and sincere privilege to serve you as your state Senator. This is Keith Ingram.