Look, we know you have limited time. It’s hard to research every single issue you hear about in the news or on social media, especially in a climate riddled with partisan posturing.
We’re endeavoring to cut through the rhetoric and give a straight down the middle, simplified explainer on important issues in Arkansas.
We’re looking at a decade of income tax cuts in Arkansas
There are been 6 tax cuts/credits in the past decade
- The majority of the cuts have benefitted primarily low and middle-income Arkansans.
- All taxpayers have seen significant rate cuts of 2% or more.
How did we compare to other states?
Arkansas had the highest top rate of its surrounding states when Gov. Hutchinson took office.
- Texas & Tennessee: 0%
- Oklahoma: 5%
- Mississippi: 5%
- Louisiana: 6%
- Missouri: 4.9%
- Arkansas: 6.9%
Since 2012, the Arkansas Legislature has passed 6 income tax cuts or credits – 1 under Governor Mike Beebe and 5 under Governor Asa Hutchinson.
The Beebe cut was aimed at all tax brackets equally. The Hutchinson cuts were:
- one for low income
- one for middle income
- one for upper and middle income
- two for most or all taxpayers
Governor Hutchinson ran for governor on a platform of cutting income tax for Arkansans and had a phased-in approach that prioritized middle and low income earners first and focused on the top rate reduction last. The first cuts made under his administration, passed in 2015, were for Arkansans making between $21,000 and $70,000. The second cuts, passed in 2017, were aimed at low income folks making less than $21,000.
The 2017 low income tax cut bill provided relief to 1.3 million taxpayers and totally eliminated income tax for 120,000 Arkansans. The middle income tax cut lowered taxes for almost 600,000 Arkansans.
After implementing tax cuts for low and middle income earners, Gov. Hutchinson said he wanted to focus on pulling the top rate down to 5% from the 6.9% it was when he took office. At that time, Arkansas had the highest top income tax rate among surrounding states, according to the Tax Foundation. Texas and Tennessee had no income tax; Oklahoma’s top rate was 5 percent; Louisiana’s was 6 percent; Missouri’s was 5.9 percent; and Mississippi’s was 5 percent.
See information about who pays the top rate below. It may not be who you think.
To that end, the next tax cut under Gov. Hutchinson was aimed at middle and upper income earners. In 2019, the legislature approved a reduction to the top tax rate from 6.9% to 5.9% over a two-year period, benefitting just under 600,000 Arkansas taxpayers earning more than $38,000 but most significantly impacting people making $79,000 or more.
In 2021, the final drop to 4.9% in the top rate, alongside significant drops throughout a simplified tax code, was approved by the legislature and scheduled to be phased in through 2025. In 2022, the cut was accelerated and went into immediate effect. It reduced the tax rate for most Arkansans and eliminated income taxes for more than 100,000 people.
For example, under the 2021 cut alone, if you made $27,000 a year, the combined tables and rate cuts dropped your rate by up to 1.1%. If you made $90,000, the rate dropped by 1% on the majority of your income.
The final income tax reduction occurred in August 2022 with a nonrefundable, one-year tax credit of up to $300 for couples and $150 for individuals that phases out at $101,000 for individuals and $202,000 for couples – impacting the vast majority of Arkansans.
Who pays the top rate?
Probably not who you think.
Sometimes when we talk about the “top rate,” it sounds like we’re referencing Jeff Bezos or the Elon Musk types. But, actually, someone in Arkansas making $36,000 was taxed at their top bracket rate of 6% and a couple earning $75,000 was taxed at a top rate of 7%.
When we say “top rate,” we’re often referring to school teachers, police officers, factory workers, families with two hardworking parents – not the millionaire / billionaires we envision.