Governor Asa Hutchinson and members of the Arkansas legislature are bragging they made the biggest tax cut in history. What they are bragging on is income tax cuts, much of which won’t happen for several years and some of which will only happen if certain economic conditions are met.
We applaud tax cuts, but let’s put the December 2021 cut into perspective by looking at how Arkansas’ top individual income tax rate compares with the six surrounding states.
Prior to the tax cut, Arkansas’ tax rate was higher than the rate in the surrounding states. After the cut, the 2022 rate is still higher than all the surrounding states![i]
These are the top marginal rates in Arkansas and the surrounding states for 2022:
- Texas – No Individual Income Tax
- Tennessee – No Individual Income Tax
- Louisiana – 4.25%
- Oklahoma – 4.75%
- Mississippi – 5.00%
- Missouri – 5.40%
- Arkansas – 5.50%
Under identical Acts 1 & 2 of the Second Extraordinary Session of 2021, Arkansas’s rate was set at 5.50% for 2022, would be reduced to 5.30% in January 2023, 5.10% in January 2024, and would only drop to 4.90% in 2025 if an economic trigger is met.
In 2025, Arkansas’ top rate will still be higher than four of the six surrounding states! But Arkansas’ rate would only be better than Mississippi and Missouri if those states make no cuts in their individual income tax rates. And, Mississippi is currently considering legislation to eliminate its individual income tax, with one plan passing the Senate! Mississippi Governor Tate Reeves recently said if their legislature doesn’t pass a bill by April to eliminate Mississippi’s individual income tax, he would consider calling a special session to repeal the tax.[ii]
When they brag on a “historic” tax cut passed in 2021, ask which tax increases they supported in 2019. There were only a few legislators who did not vote for big increases in 2019. Including, passing the Internet Sales Tax imposed on Arkansas consumers, a tax increase on gasoline and diesel fuel, and that was just a start of the increases. Want to see all the taxes they voted on in 2019 and who voted for them? See our article: “I Cut Taxes” – Campaign Words Part 8
When they brag on a “historic” tax cut remember their tax INCREASES in 2019 and other years helped the state amass a record surplus of general revenue of a BILLION dollars and then they increased spending from surplus in 2022.