Press Release

Asa Arkansas's Governor

FOR IMMEDIATE RELEASE
12.13.2016

Gov. Hutchinson Details $50 Million Tax Cut; Focuses on Lower Income Arkansans

Income Tax on Military Retiree Benefits to be Eliminated

LITTLE ROCK – Governor Asa Hutchinson today laid out the details of his income tax cut of more than $50 million. The Governor’s plan will focus on lower income Arkansans who earn between $0 and $20,999 annually. The plan will also reduce the lowest rate in the middle income tax table in order to alleviate the “cliff” effect that occurs when an increase in a taxpayer’s income causes a shift to the middle income table. 

The total price tag for the tax cut is $50,517,296—the bulk of which (approximately $46 million) will substantively affect an estimated 657,000 Arkansans. Of that 657,000 (44% of the roughly 1.5 million individual income taxpayers in the state), approximately 120,000 taxpayers in the lowest bracket will be taken off the tax rolls completely. See the breakdown below or HERE.

Bracket                       Current Rate              Reduced Rate            Revenue Reduction

$0 - $4,299                  0.90%                          0.00%                          $ 22,283,558
$4,300 - $8,399           2.40%                          2.00%                          $ 7,508,244
$8,400 - $12,599         3.40%                          3.00%                          $ 5,617,899
$12,600 - $20,999       4.40%                          3.40%                          $ 10,898,058

An additional $4,290,537 will go towards bridging the lower income brackets with the middle income brackets to prevent the cliff effect.

Total Income Tax Cut                                                                        $ 50,517,296

In addition to his tax cut proposal, Governor Hutchinson also announced Tuesday afternoon his support for exempting all retirement benefits of retired military service members from state income tax—a $13 million reduction in General Revenue. This exemption, consistent with the Governor’s approach to additional tax reductions, must be offset with the repeal of other tax exemptions as outlined by the Governor, HERE. 

Gov. Hutchinson issued the following statement:

“I am excited to unveil this new round of tax cuts as a part of my continued commitment to flattening the state income tax. This cut moves the state toward that goal by removing the tax burden on the lowest income Arkansans.

“In addition, this plan also eliminates the tax on the retirement benefits of our retired service men and women. I believe that reducing the tax burden on our veterans is the right thing to do, provided that we can make up for the loss of revenue. That is why I am asking the legislature to take action to make the necessary offsets so that these cuts are budget neutral. I am confident that this conservative approach to tax cuts will increase fairness and spur economic development by keeping more money in the pockets of the everyday Arkansans who need it the most.”

In 2015, Governor Hutchinson proposed—and the legislature passed—his $100 million Middle Class Tax Cut, the largest income tax cut in Arkansas history. That tax cut provided substantive tax relief to approximately 688,000 Arkansans (46% of the state’s individual income taxpayers). If this latest proposal is passed, approximately 90%—or 1.3 million—of the state’s individual income taxpayers will have benefited from substantive tax relief legislation since 2015. 


CONTACT: Press Shop (press@governor.arkansas.gov or 501.682.3612)