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Who benefits from the most significant tax cut in Arkansas history?

The governor says this would be nearly $500 million in tax relief each year once it is fully implemented and that this tax reduction plan will benefit all taxpayers.

ARKANSAS, USA — A historic tax cut may be in the future for the Natural State. Governor Asa Hutchinson outlined what he hopes this will do during his address on Tuesday during his weekly press briefing. He says a bill to cut state taxes would be the largest decrease in Arkansas history. 

Lawmakers introduced several bills on the topic on opening day, but both chambers narrowed down their selection to two bills that will cut the state's top income tax rate from 5.9% to 4.9% in 2025, the Associated Press reports

“Lower-income individuals will see a greater percentage reduction in their taxes than any other category group," Hutchinson said. "Over 100,000 low-income Arkansans will have their state income tax liability totally eliminated by this plan." 

He says this would be nearly $500 million in tax relief each year once it is fully implemented. The governor says this tax reduction plan will benefit all taxpayers.

“This will increase our competitiveness as a state in attracting industry and talent to Arkansas. So, all taxpayers benefit from this,” Hutchinson said. 

Mervin Jebaraj, an economist at the University of Arkansas, says an independent analysis estimates this package will cost $600 million.  

“The estimates are that more like two-thirds of that tax cut will go to high-income earners than low-income earners, Jebaraj said. "So someone at the highest income is probably going to get $10,000 a year, whereas someone that’s a low-income earner is probably going to get $20 to $30 to maybe a dollar a day." 

Roby Brock with our content partner Talk Business & Politics says the top tax rate would be reduced from 5.9% incrementally. After four years it would drop to just under 5%. 

“We have over a billion dollars surplus," Brock said. "We have another $1.2 billion in what’s going to be called a catastrophic reserve fund. So, there is really a lot of room to reduce taxes right now, if that’s the policy of the state and it is of the governor." 

Brock says the governor also put on the special session call for lawmakers to consider recycling incentives and tax credits for the state   

“There is the prospect for a very very large steel manufacturing facility to locate in Arkansas and those recycling tax credits, those incentives would allow state economic developers to put a more robust package together to try to recruit that steel business,” he said. 

A $60 credit that will be given to low-income taxpayers will give a reduction in state income tax for more than 535,000 Arkansans, which is about 28% of taxpayers in the state. The proposed tax cuts will also eliminate the state income tax liability of 104,881 low-income Arkansans. 

“There are some additional take breaks in there for other income groups as well and maybe a corporate tax cut included in this package as well," Mervin Jebaraj.

A law enforcement tax credit was also proposed ahead of the special session.

The governor said in his briefing that he spoke with both Sheriff Marty Boyd of the Sheriff's Association and Chief Gary Sipes of the Association of Chiefs of Police. He said that they both agreed that a tax credit does not increase the salaries of law enforcement officers.

"We should worry about their low pay, but the answer is to increase the salaries," Hutchinson said.

He went on to say that it would be hard to give a tax credit to law enforcement and not include all of our other first responders. He said that the state does have a responsibility for the Arkansas State Police, and he expects that we will have an effort sometime in the future to work towards increasing law enforcement pay.

"I have directed Secretary Jami Cook to work on a plan to increase Arkansas State Police salaries and see what ways we can encourage local governments to raise the salaries of the local law enforcement because that is the responsibility they have," Hutchinson said.

The governor says he applauds lawmakers for their decision to focus on taxes during this session. 

The senate voted Tuesday morning to exclusively focus on measures related to taxes. The discussion on these tax cut bills will continue Wednesday, Dec. 8 morning when the senate and house reconvene.  

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