Tax Committees Pass Expedited Tax Cut Legislation
A special legislative session called by Governor Asa Hutchinson began Tuesday, August 9. The House and Senate committees on Tax and Revenue passed identical bills (HB1002 and SB1) out of committee. The legislation would expedite income tax cuts passed last year during a special session. The state currently has a tax surplus of $1.6 billion.
Under current law, income tax rates would be gradually reduced over four years if certain conditions are met. Under the proposed legislation the tax cuts would instead be implemented immediately and retroactively to January 1, 2022. Specifically, the legislation would reduce the top individual income tax rate down to 4.9% and the top corporate income tax rate down to 5.3%. The tax cuts are estimated to save the median Arkansas taxpayer around $365 for 2022. A one-time non-refundable “inflationary” income tax credit of up to $150 is also included.
This is an improvement for taxpayers. Instead of unknown tax liabilities and whether they will see an actual tax break, the tax laws are simplified with a tax cut realized immediately.
During the hearings there was opposition expressed by Democrat legislators. Sen. Keith Ingram (D-West Memphis), who is quitting the legislature at the end of this term, expressed issues with the size of the tax cut. Rep. Tippi McCullough (D-Little Rock) claimed that people were still struggling to make ends meet after the COVID-19 pandemic and due to Joe Biden’s historic inflation. House sponsor Rep. Joe Jett (R-Success) responded that he felt this would provide some relief for working Arkansans who need help with increased costs due to inflation.
A representative from Arkansas Advocates for Children’s and Families spoke against the legislation, saying the money should instead be used for government programs. The ultra-liberal group advocates for increased government growth and government dependency, specifically for children and poor families. Sen. Jason Rapert (R-Bigelow) asked the speaker if there was a single government program that the state had cut funding for. The speaker said he could not think of one.
Rep. Robin Lundstrum (R-Elm Springs) made a point that the tax money that was being discussed was in fact not being given to the taxpayers, but instead being returned because they were overtaxed.
Another key aspect of the special session legislation is the adoption of Section 179 of the IRS code for state income tax purposes to allow for full depreciation of business equipment all at once instead of over several years. Sen. Ben Gilmore (R-Crossett) and Rep. Howard Beatty (R-Crossett) have been pushing for this good legislation since the 2021 regular session. This will be a big win for Arkansas businesses.
The legislation will bring tax relief immediately and is a big win for businesses utilizing Section 179 for depreciation, offsetting tax liability. Conduit supports the legislation and encourages everyone to contact their legislators to ask them to vote for it. The full Senate and House will debate the measure on Wednesday, August 10.