Gov. Sarah Huckabee Sanders (R-AR) signed legislation Wednesday to cut property and income taxes in Arkansas.
The income tax rate is now 3.9% compared to the previous 4.4% in Arkansas for people who make more than $25,000 annually. People who make less will continue to pay a 3.4% tax rate. The corporate tax rate was also cut from 4.8% to 4.3%.
“Half a billion dollars is how much money we just put back into the pockets of the people of Arkansas,” Sanders said at the signing. She said Arkansas now has the lowest income tax in the South among states that tax income.
Cut income tax
— Sarah Huckabee Sanders (@SarahHuckabee) June 20, 2024
Lawmakers met for a special session where they worked to keep the state’s hunting and fishing programs running while also cutting the state’s top corporate and individual income tax rates.
They also increased the homestead tax credit by $46 million.
The new rates retroactively went into effect Jan 1. Financial officials believe the cuts will cost the state $483 million in the first year and $322 million in the year after that. The legislation requires Arkansas to set aside $290 million in case of financial emergency
Supporters of the cut point to the state’s expected $708 surplus this year, while opponents believe the cuts only benefit high earners. Some state Democrats believed the state’s high maternal mortality rate should have been addressed instead.
“Arkansas has the highest maternal mortality rate in the nation, the second highest teen pregnancy, and we’re third highest in infant mortality,” Democratic state Rep. Denise Garner said. “We still have yearslong delays for those with disabilities.”
Republicans said the cuts will not affect those programs.
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“Bottom line is this: We’re not cutting anything, we’re not cutting anything in state government,” Republican state Sen. Ben Gilmore said. “In fact, the budget increased 1.76%. That means no program got cut.”
The tax cuts passed with overwhelming support as both chambers have a large Republican majority.
