Effect of Arkansas governor's tax cut plan on future fleshed out
Starting in ’20, top rate would pare to 6.5%
By Michael R. Wickline
State officials Tuesday provided details to the Legislature's tax overhaul task force on how Gov. Asa Hutchinson's income tax cut proposal would affect the state budget several years down the road.
The Republican governor has proposed gradually reducing the top individual income tax rate from 6.9 percent to 5.9 percent and reducing the number of individual income tax tables from three to one.
Two weeks ago, Hutchinson told lawmakers looking at agency budgets how his plan would affect the budget over the next two years. His plan will be considered in the regular legislative session that begins Jan. 14.
In tax year 2020, his proposal would cut the top rate from the current 6.9 percent to 6.5 percent and simplify the tax tables and brackets. His proposed general revenue budget for fiscal 2020, which starts July 1, 2019, factors in a $47.4 million reduction in revenue. In tax year 2021, the top rate would be cut to 6.3 percent. The governor's budget factors in a $63.6 million cut in fiscal 2021, which starts July 1, 2020.
On Tuesday, lawmakers heard more of the plan:
• In tax year 2022, the top rate would drop to 6.1 percent. State general revenue would be reduced by $32.4 million in fiscal 2022, starting July 1, 2021.
• Phase four, taking effect in tax year 2023, would see the top rate make the final drop to 5.9 percent. Tax revenue would be cut $32.2 million in fiscal 2023 and then $16 million more in fiscal 2024.
State officials call Hutchinson's proposal the "2-4-5.9" plan because of the rates that ultimately would be charged at different income levels. People with taxable income up to $8,000 a year would pay a 2 percent income tax rate; those with between $8,001 and $18,000 in taxable income would pay a 4 percent rate; and those with taxable income of $18,001 and up would pay a 5.9 percent tax rate. READ MORE.