Arkansas governor signs tax appropriation bills after special legislative session ends
For the third time in 15 months, Gov. Sarah Huckabee Sanders signed legislation to lower taxes for Arkansans. This round, approved during this week’s special session, will affect approximately 1.1 million taxpayers.
Along with trimming the state’s top individual and corporate income tax rates, Sanders also signed legislation to increase the homestead property tax credit and fund the Arkansas Game and Fish Commission.
By: Mary Hennigan and Tess Vrbin
Arkansas Advocate
For the third time in 15 months, Gov. Sarah Huckabee Sanders signed legislation to lower taxes for Arkansans. This round, approved during this week’s special session, will affect approximately 1.1 million taxpayers.
Along with trimming the state’s top individual and corporate income tax rates, Sanders also signed legislation to increase the homestead property tax credit and fund the Arkansas Game and Fish Commission.
“Arkansans are looking at Washington and seeing nothing but failure,” Sanders said. “…Today they can look at Little Rock and get some of their economic confidence back.”
Financial experts say the economy is improving, but consumers may not feel that way because of pre-pandemic comparisons made at the grocery store and the high cost of housing. Sanders said “savings are more important than ever” given expensive household staples.
Tax savings among Arkansans will vary based on income, with the wealthiest of residents faring the best, according to data from the Arkansas Department of Finance and Administration.
In addition to the tax and appropriation measures, lawmakers this week also considered two resolutions from the House of Representatives opposing the proposed Arkansas Abortion Amendment and the Educational Rights Amendment of 2024. In the Senate, lawmakers took issue with one of the governor’s recent appointments.
Tax cuts
House Speaker Matthew Shepherd, R-El Dorado, said after adjournment that Wednesday was “a historic day” with the state income tax at the lowest it has been since its inception. He also recognized the opportunity to do more.
“I think it comes down to the fundamental view of whose money it is in the first place,” Shepherd said. “I think, and I think the majority of the Legislature would believe, that’s hardworking Arkansans’ money.”
The legislation, now Act 1 of 2024, will lower the top corporate income tax rate from 4.8% to 4.3% and the top individual income tax rate from 4.4% to 3.9%, retroactive to Jan. 1 of this year. The tax cuts went into effect immediately upon Sanders’ signature.
Sanders recognized Arkansas’ current rate as the lowest in the region among states that levy an income tax.
Democratic lawmakers in both chambers were the only members to vote against the tax cuts, citing concerns that the cuts will primarily benefit wealthy Arkansans and reduce the state’s ability to fund services.
The tax cut legislation requires $290 million in general revenue to be set aside in a reserve fund in case the money is needed to make up for any decrease in state general revenue due to the tax cuts.
Democratic leaders and advocacy groups alike named several services that could be funded instead of pursuing tax cuts, such as programs to reduce childhood poverty and incentives for affordable housing.
In April 2023, the Legislature approved more than $100 million in tax cuts, reducing the top individual tax rate from 4.9% to 4.7% and the top corporate tax rate from 5.3% to 5.1%. During September’s special session, legislators lowered the top individual and top corporate income tax rates to 4.4% and 4.8%, respectively.
Looking ahead to more tax cuts, Sanders said there aren’t “any plans for special sessions at this point,” though she would continue to look for opportunities to phase out the state income tax. Sanders said she would not comment on any legislation that may be proposed during the next regular session in 2025.
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