TAX CUTS EMERGE AS PUBLIC POLICY

"There is significant evidence that reductions in marginal state tax rates encourage state economic growth ...Rates on productive behavior should be reduced." “Arkansas Policy Foundation, Murphy Commission project, 1998

“Reduce the state's income tax. Among the reforms, consider an across the board 10% cut...reduce the marginal rates, exempt taxpayers below a certain income level from filing, and expedite the process of indexing for inflation.” Policy Foundation, Murphy Commission project, 1998¹

(May 2019) The 92nd General Assembly of Arkansas will be remembered for advancing tax cuts as public policy, a unique development in a state better known for government attempts to generate economic activity.

Under the leadership of Gov. Asa Hutchinson, legislators reduced individual income and corporate tax rates in a bid to make Arkansas more competitive with states in the region. Despite this year's policy changes, Arkansas' income tax rates remain above the regional average.

The Assembly reduced Arkansas's top individual income tax rate to 5.9%. It was 7.0% earlier this decade.

The tax rate reductions were recommended last year by a legislative task force, a reminder of the strategic importance of such panels.

An unresolved problem is Arkansas state spending, which exceeds U.S. and regional averages on a per capita basis. Further rate reductions are unlikely until policymakers solve this problem.

-- Greg Kaza

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¹ Taxes and Savings in Arkansas by Keith Berry, Ph.D., and Improving Productivity by Reducing Taxes by Drs. Ronald John Hy and R. Lawson Veasey. Introduction by French Hill, Chairman, Murphy Commission Tax Workgroup.