Gov. Sarah Huckabee Sanders on Friday summoned the Arkansas General Assembly into special session, starting Monday, to cut the state's top individual income tax rate from 4.7% to 4.4% and the state's top corporate income tax rate from 5.1% to 4.8%, effective Jan. 1, 2024.
The Republican governor also called upon lawmakers to grant an up to $150 one-time income tax credit for taxpayers making less than $90,000 a year, retroactive to Jan. 1, 2023.
"It is no secret around the Capitol that tax cuts will be our top priority," Sanders said during a news conference in the governor's conference room with four state lawmakers and three of the state's other six constitutional officers at her sides.
She said two of Arkansas' neighbors, Texas and Tennessee, don't levy state income taxes and that sometimes makes it hard for Arkansas to be competitive.
"With President Biden's big government policies making it even harder for people to make ends meet, every Arkansan needs a little extra money in their pocket," Sanders said.
She said about 1 million taxpayers making up to $90,000 a year in Arkansas would receive the one-time income tax credit of $150 under the proposed tax cuts.
Sen. Jonathan Dismang, R-Searcy, said the governor is committed to working families.
The up to $150 one-time income tax credit for taxpayers making less than $90,000 a year, retroactive to Jan. 1, 2023, would total up to $300 for a married couple filing jointly, he said.
"There is not a whole lot we can do with the nonsensical economic policies that are coming out of D.C. right now, but we can do something and I think this is a responsible step for us to take to help," struggling working families, said Dismang, a co-chairman of the Joint Budget Committee.
He said the proposed cut in the state's top individual income tax rate from 4.7% to 4.4% would reduce state general revenue by about $150 million a year and the proposed cut in the state's top corporate income tax rate from 5.1% to 4.8% would cut state general revenue by about $35 million a year.
The one-time tax credit for middle-income taxpayers would reduce state general revenue by about $155 million, Dismang said. He later filed Senate Bill 2 that would implement the proposed income tax cuts.
For tax years starting on or after Jan. 1, 2024, the 4.4% individual income tax rate would include Arkansans reporting more than $87,000 in net income and apply to their income of $4,401 and above under SB2. That top rate also would include Arkansans having net income up to $87,000 and apply to their income between $24,300 to $87,000 for tax years starting on or after Jan. 1, 2024, under the legislation.
Under SB2, the top corporate income tax rate of 4.8% would apply to net income of corporations exceeding $11,000 for tax years starting on or after Jan. 1, 2024. House Revenue and Taxation Committee Chairman Les Eaves, R-Searcy, filed an identical bill as House Bill 1001.
After the news conference, Senate Democratic leader Greg Leding of Fayetteville said in a written statement that "Any tax relief should be targeted to help working Arkansans, not our state's top earners."
In the regular session earlier this year, the General Assembly and Sanders authorized a $177.7 million increase in the state's general revenue budget to $6.2 billion in fiscal 2024, with most of the increase allocated to education and corrections programs.
In May, the finance department projected a $423.3 million general revenue surplus at the end of fiscal 2024 on June 30, 2024.
Sanders said during Friday's news conference that she also wants the Legislature in the special session to place $710 million into the Arkansas Reserve Fund "to keep responsibly phasing out the state's income tax entirely."
In her written call for the special session, Sanders asked lawmakers to enact legislation to create and transfer existing surplus funds to the Arkansas Reserve Fund Set-Aside in the Restricted Reserve Fund. Senate Revenue and Taxation Committee Chairman Sen. Jimmy Hickey, R-Texarkana, filed Senate Bill 1 to do that. Joint Budget Committee Co-Chairman Rep. Lane Jean, R-Magnolia, filed an identical bill as House Bill 1004.
From the $1.161 billion fiscal year 2023 surplus, $710 million of that "remains uncommitted/available" at this point, according to Scott Hardin, a spokesman for the state Department of Finance and Administration.
Sanders said Friday "these [proposed] tax cuts go a long way toward shrinking government, but they are just one piece of the puzzle.
"To make our government smaller we have to make it more efficient," she said. "To do so, we will also update Arkansas' Freedom of Information Act." Among other things, she claimed some people are using the Arkansas Freedom of Information Act in an attempt "to slow down our bold conservative agenda."
The state's $1.161 billion general revenue surplus in fiscal 2023 is state government's second-largest general revenue surplus in any fiscal year, behind only the $1.628 billion surplus accumulated in fiscal 2022 that ended June 30, 2022. State government's third-largest general revenue surplus totaled $945.7 million in fiscal 2021 that ended June 30, 2021.
In April, Sanders signed into law a bill that cut the state's top individual income tax rate from 4.9% to 4.7% and the state's top corporate income tax rate from 5.3% to 5.1%, retroactive to January 1, 2023.
The top individual income tax rate of 4.7% includes Arkansans reporting more than $87,000 in net income and is applied to any income over $8,800 for tax years starting on or after Jan. 1, 2023. That top rate included Arkansans having net income up to $87,000 and is applied to their income between $24,300 to $87,000 for tax years starting on or after Jan. 1, 2023.
The top corporate income tax rate of 5.1% applies to net income of corporations exceeding $25,000 for tax years starting on or after Jan. 1, 2023. The legislation signed into law in April is projected by the state finance department to reduce state general revenue by $186 million in fiscal 2024 and $124 million in fiscal 2025.
In April, Sanders also signed into law a bill that will gradually phase out the "throwback rule" on income of multistate corporations over a seven-year period, starting in the tax year starting on or after Jan. 1, 2024, and be complete in tax year 2030. The law is projected by the finance department to reduce general revenue by $10.6 million in fiscal year 2024 and ultimately reduce general revenue by $74 million a year in fiscal year 2030 and thereafter.
OTHER ITEMS ON THE CALL
In her written call for the special session, the governor called for the General Assembly to convene at 11 a.m. Monday to also consider:
Prohibiting Arkansas public entities from mandating covid-19 vaccines or vaccine for variants or engaging in related coercive actions, requiring the Arkansas Department of Health to maintain publicly available information on the risks of the covid-19 vaccines, and providing an exemption in certain cases if it's approved by the Arkansas Legislative Council.
Sen. Joshua Bryant, R-Rogers, filed Senate Bill 3 to do that. Rep. Howard Beaty, R-Crossett, filed an identical bill as House Bill 1002. Bryant said his bill would renew the provisions of Act 977 of 2021, which he said expired Aug. 23.
Amending Arkansas Code Annotated 20-22-1011 (a) "to provide clarity for public schools, private schools and educational institutions to keep exterior doors closed and locked during school hours apart from transition times as required by Arkansas Code Annotated 6-21-121."
Amending the Philanthropic Investment in Arkansas Kids Program Act and the Arkansas Children's Educational Freedom Account Program to provide for the provision of educational services and access to additional funding for children with disabilities under the Philanthropic Investment in Arkansas Kids Program, the Succeed Scholarship Program, and the Arkansas Children's Educational Freedom Account Program.
Clarifying that Arkansas Code Annotated 16-90-120 (e) (1) applies to offenses committed on or after July 2, 2007, but not before Jan. 1, 2024, and Arkansas Code Annotated 16-90-120 (g) applies to sentencing for offenses committed on or after Jan. 1, 2024. The measure would clarify sentencing for a felony with a firearm.
Confirming the latest bunch of gubernatorial appointees. The Senate considers confirming the governor's appointees.
Providing for payment of expenses and per diem for the state House of Representatives and state Senate for the special session.
Under the state constitution, legislators may take up bills not on the governor's special session agenda after finishing the items on the governor's call by passing a resolution with a two-thirds vote in both chambers.