From the historic hallways of the most beautiful state Capitol in our great nation, this is Senator Keith Ingram.
Arkansas taxpayers have something to look forward to this fall, other than traditional back-to-school activities and a new football season.
When summer is over, the legislature will most likely meet in special session to enact widespread reductions in the state income tax.
The governor has publicly announced his intention to call the special session, and he has scheduled meetings with legislative leaders this week to work on the details.
The governor’s proposal is to lower the top rate from 5.9 percent to 5.5 percent, over a two-year period.
If the legislature goes along, the plan would lower income taxes on Arkansas families by $57 million when it is fully in effect next year. The following year it would lower income taxes by an additional $27 million a year.
The tax cuts would benefit about 580,000 taxpayers. In other words, about 41 percent of all taxpayers in Arkansas would see a drop in their income taxes.
The proposal would also eliminate quirks in the tax code that unintentionally raise taxes for people when they get a small raise, and are bumped into a higher bracket.
For instance, someone earning just under $22,900 a year could get a raise of $15 a year, but their tax bill would go up by $185 because they would be bumped into a higher bracket.
I’m on the Senate Revenue and Taxation Committee, which will do the preliminary work on any tax cut proposal.
Most of my colleagues in the legislature are generally in favor of an income tax cut. The state’s economy is bouncing back from the negative impacts of the Covid-19 pandemic. Except for Louisiana, all of our neighboring states have a lower top income tax rate than Arkansas.
Everybody in eastern Arkansas is keenly aware that Tennessee doesn’t have an income tax. Neither does Texas.
However, the legislature is not going to just roll over and pass the governor’s proposal without adding important amendments.
The chairman of the House Revenue and Taxation Committee supports a general decrease in income taxes for low income families.
Other legislators want to help low-income families by raising the standard deduction. Other lawmakers are hesitant to proceed full speed ahead on tax cuts, until we have a clearer idea of how the Arkansas economy will respond when federal relief funds are no longer coming in to the state.
Personally, I want to add a precautionary “trigger,’ which is a mechanism we have used in the past to protect the state’s ability to continue providing essential services.
For example, if the economy takes a downturn, a trigger would delay the effective date of tax cuts until business activity picks up again.
These are all issues that we’ll address over the summer. One thing is certain, though. We’ll iron out all the details before we get embroiled in a drawn-out special session, in order to keep the session as short as possible.
From the Capitol, it is always my greatest honor and most sincere privilege to serve you as your state Senator. This is Keith Ingram.