Arkansas Gov. Hutchinson Signs New Tax Relief Plan

Published February 28, 2017

Arkansas lawmakers approved Gov. Asa Hutchinson’s (R) proposed tax-relief plan, reducing tax burdens by about $50 million and reforming the state’s income tax rates.

On February 2, Hutchinson signed House Bill 1159, the bill proposed by lawmakers enacting his plan, into law.

In 2015, Hutchinson reduced tax rates for individuals whose taxable income fell into two of the state’s six tax brackets by about one percentage point. Tax rates for individuals’ income falling into four of the state’s six tax brackets will be reduced by between 0.4 and 1 percentage points, depending on the bracket.

The tax changes also reduce tax burdens for individuals earning between no taxable income and $20,999.

Hutchinson’s tax plan requires lawmakers to convene a task force to study and recommend additional tax reforms. The task force would need to issue its report by September 2018.

‘Best Tax Reform’

Daniel Greenberg, president of the Advance Arkansas Institute, says reducing tax rates is “the most powerful” kind of tax reform.

“The most powerful and best tax reform is always rate reduction, and Gov. Hutchinson has been a real hero on rate reduction,” Greenberg said. “There are really two important parts of the tax reform plan: a short-term part and a long-term part. The short-term part is rate reduction, which might be always praiseworthy. Perhaps even more important, and what some of the more conservative members of the legislature are excited about, is the prospect of long-term tax reform.”

Flatten the Tax

Greenberg says Hutchinson and Arkansas lawmakers should continue to flatten income tax rates, making taxation fairer and less political.

“If we get to the point where there’s essentially one rate on everybody, not counting a flat-tax-style exemption for the very poorest, then we don’t have to have these arguments about which segment of the population we’re going to bestow rate relief upon. It’s always controversial when you talk about benefiting some members of the public in a different fashion than others.”

Cites Benefits to Taxpayers

David Ray, director of Americans for Prosperity-Arkansas, says the bill would allow Arkansas taxpayers to spend more of their own money.

“The most significant effect is that it allows hardworking Arkansas taxpayers to keep more of what they earn,” Ray said. “So, if you’re a low-income family, that might help you buy school supplies for your kids, it might help you save for college, it might help you pay for a car repair you’ve been needing to make but haven’t had the money for, or it could help people get a start on saving for retirement. There are lots of tangible ways it could improve people’s lives.”