Report outlines options to eliminate Arkansas' state income tax
Thursday, December 7, 2023
Arkansas is set to reduce income tax rates for individuals and corporations starting next year.
Opportunity Arkansas is advocating for the elimination of the state income tax altogether.
Nicholas Horton, founder and CEO of the group, said the new top tax rate of 4.4% still penalizes people for earning more money. Horton believes eliminating the state income tax would help Arkansans keep more of their income.
"Reality is, we've been chipping away at the state income tax pretty aggressively," Horton acknowledged. "And we talked about this in the report. What's been happening is, revenue has actually gone up, because people have more money in their pockets to spend at local small businesses, all across the Arkansas economy."
Medicaid is the largest single line item in the state budget, consuming more than one in every four dollars the state spends. Horton said Medicaid spending is key to addressing Arkansas' budget gap. He added the state's income tax generates only about $3 billion a year, while the state spends close to $35 billion.
Horton pointed out in recent years, Arkansas has lowered its income tax rate from nearly 7% to 4.4%. He explained a report from his organization outlines strategies state policymakers can implement to accelerate the state income tax elimination.
"We worked a lot with state policymakers in the Legislature and the executive branch," Horton recounted. "Our objective was to really present a menu of options, and start a more detailed conversation about how we get to zero."
Horton added Texas and Tennessee have eliminated the personal state income tax, and thinks following suit would be "transformative" for Arkansans.
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