Summary of Tax Cuts
Governor Asa Hutchinson signed into law the 5.9 Tax-Cut Plan on February 19, 2019.
Explanation of the 5.9 Tax Plan
The 5.9 Income Tax Reduction will be phased-in over two years.
The first year, beginning Jan. 1, 2020, will see the traditional, six-rate upper-income bracket eliminated, and replaced with a four-rate bracket of 2%, 4%, 5.9%, and 6.6%. In this phase, we will consolidate brackets, and reduce the top marginal tax rate from 6.9% to 6.6%. We will also reduce the top marginal tax rate in the middle-income bracket from 6.0% to 5.9%. The fiscal impact of this phase will be $51.2m. This cost will be split between two state fiscal years, with $25.6m cuts in FY2020 and FY2021.
The second year, beginning Jan. 1, 2021, will reduce the top marginal tax rate from 6.6% to 5.9%. The fiscal impact of this second phase will be $45.8m. The impact will be spread across two fiscal years, FY2021 and FY2022.
How can we drop the top rate to 5.9% for $97m when making the same cut using the traditional bracket would have cost twice as much ($181m)?
Does anybody pay more under this plan?
Does this preclude us from making future reductions in individual income tax rates?
To view Key Points of the 5.9 Tax Plan, CLICK HERE.
SB 211 was the third phase of Governor Hutchinson’s three-part plan to reform Arkansas’s tax code. In 2015 and in 2017, he signed into law the two biggest tax cuts in the state’s history. With the passage of Senate Bill 211 today, 100 percent of Arkansas income-taxpayers will benefit from nearly $250 million in reduced income taxes.