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Arkansas Tax Reform and Relief Legislative Task Force Update
Tuesday, December 12, 2017 7:00 AM

The Arkansas Tax Reform and Relief Legislative Task Force met Dec. 5–6 to continue studying the impact of tax reform in other states across the country. The task force reviewed an extensive report comparing tax rates in Arkansas to those of surrounding states and those with similar populations and economic factors.

The first area the task force compared was that of personal income tax. Arkansas has six income tax brackets. For comparison, the state of Missouri has 10, while Alabama, Kansas, Louisiana, and Mississippi have three. The report showed that eight states across the country have a flat tax rate. Flat rates range from 3.07 percent in Pennsylvania to 5.499 percent in North Carolina. Remaining states have a progressive tax with income brackets like Arkansas.

The task force heard testimony from officials in North Carolina and Indiana where they have implemented extensive reform in recent years. Arkansas Tax Reform and Relief Task Force proposal will likely be considered during the 2019 Regular Legislative Session.

During the 91st General Assembly, lawmakers lowered the income tax rate for Arkansans making below $21,000 a year. Since 2008, 18 states including Arkansas have cut their individual income taxes, and 15 states have reduced their corporate income taxes. Several others have fundamentally remade their tax codes.

Arkansas’ sales tax rate is at 6.5 percent. Surrounding states' sales tax rates range from 4 percent to 7 percent.

When comparing state corporate income taxes, 31 states have a flat rate ranging from 3 percent to 9.9 percent. Arkansas has six brackets for state corporate income taxes, with rates ranging from 1 percent to 6.5 percent, depending on the income.

Arkansas’ property tax and exemptions were the discussion Dec. 6, during which it was noted that Arkansas local governments are more reliant on sales taxes than property taxes in comparison to other states. The property taxes go to local governments entities.

The Tax Reform and Relief Act of 2017 created the task force to explore future tax reform. The task force is required to complete a report by Sept. 1, 2018. The report will include proposals for tax cuts and job growth.

The January Task Force meeting will focus on income taxes.

If you have any questions about the above information, please contact Arkansas Credit Union Association lobbyist Ron Herrod at 501-944-3068 or rharrod@sbcglobal.net.