The Arkansas House Revenue and Taxation Committee on Wednesday advanced identical bills that would cut the state’s top individual and corporate income tax rates and create a temporary income tax credit for certain taxpayers.
In voice votes with no audible dissenters, the House committee recommended House approval of Senate Bill 8 by Sen. Jonathan Dismang, R-Searcy, and House Bill 1007 by Rep. Les Eaves, R-Searcy.
The action came on the third day of a special session called by Republican Gov. Sarah Huckabee Sanders in which the debate over overhauling the Arkansas Freedom of Information Act has overshadowed the proposed tax cuts.
The two bills would trim 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.
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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 $8,801 and above. 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 bills
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, under the measures.
The bill also would create a temporary income tax credit of $150 for individual taxpayers in Arkansas with net income up to $89,600 and a temporary $300 income tax credit for married couples filing jointly with net income up to $179,200, retroactive to Jan. 1, 2023, he said.
About 1.1 million individual income taxpayers would receive a tax reduction and about 7,500 corporations with a net taxable income greater than $11,000 would receive a tax cut under SB8, according to the state Department of Finance and Administration.
The state finance department projected that SB8 would reduce state general revenues by a total of $248.5 million in the fiscal year 2024 that started July 1 and ends June 30,2024 — including $156.3 million for the “inflationary relief income tax credit” — and $184.5 million in fiscal 2025 that starts July 1, 2024 and ends June 30, 2025.
Cutting the state’s top individual income tax rate from 4.7% to 4.4%, effective Jan. 1, 2024, is projected by the finance department to reduce state general revenues by $75 million in fiscal 2024 and $150 million in fiscal 2025. Trimming the state’s top corporate income tax rate from 5.1% to 4.8%, effective Jan. 1, 2024, is projected to reduce state general revenues by $17.2 million in fiscal 2024 and $34.5 million in fiscal 2025.
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.
Rep. Lane Jean, R-Magnolia, told the House Revenue and Taxation Committee on Tuesday afternoon the state’s projected surplus for fiscal 2024 would be more than enough to cover the estimated $248 million cost of the individual and corporate income tax rate cuts and temporary income tax credit in fiscal 2024 in SB 8 and HB 1007.
Approximately $174 million will remain from the projected fiscal year 2024 surplus if SB8 becomes law, finance department spokesman Scott Hardin said.
“The next required forecast date is Feb. 1, 2024,” he said. “However, a new forecast could be called by the State CFO (Secretary Hudson) and Governor at other times if conditions warrant. We don’t have any immediate plans to issue a revised forecast.”
Jim Hudson also is secretary of the state Department of Finance and Administration.