Governor Signs Historic Tax Cut Into Law

The new legislation will go into effect in January 2022.

Tax papers

Gov. Asa Hutchinson signed two identical bills into law this afternoon that supporters said will lower income taxes for all working Arkansans. When fully implemented, the plan is expected to result in nearly $500 million annually in tax relief, making it the largest tax cut in the state’s history. 

During a signing ceremony this afternoon, the governor thanked lawmakers for a successful special legislative session.

“Each member has stepped up to the plate and passed historic tax cuts that will put us in a position in Arkansas for the future to be competitive, to put more money in individuals’ pockets and that is the design,” Hutchinson said. 

Lowering taxes in the Natural State has been a focus of Hutchinson’s administration since being elected governor in 2014. He signed a $102 million tax cut for middle-income earners in 2015 and a $50 million tax cut for low-income Arkansans in 2017. The governor signed legislation reducing the top marginal tax rate from 6.9 percent to 5.9 percent in 2019.

Today’s signing ceremony for the state’s latest tax cut follows a three-day special legislative session at the capitol. When discussion began Tuesday, critics of the tax plan said it would mostly benefit the wealthy. The Democratic Party of Arkansas on Wednesday organized a press conference where members suggested the state could have a more long-term impact on Arkansans’ lives by investing in things like an earned income tax credit or new Pre-K classrooms. 

Arkansas Advocates for Children and Families echoed those sentiments in a statement the organization released today expressing disappointment in the legislature’s decision to support this tax cut plan instead of investing in Arkansas communities that are still hurting because of the pandemic. 

“We should be investing in our communities by hiring caseworkers for the underfunded foster care system, helping the thousands of Arkansans who have been waiting for home and community-based care for years, helping Arkansans afford the childcare they need to be able to get back to work, making sure Arkansas workers have the skills to compete in a global economy, and so much more,” the statement read.

During today’s press conference, Gov. Hutchinson said he disagreed with critics of the legislation.

“They’re making the case that they would rather trust government to spend the money wisely versus putting it in the pockets of individuals and I disagree with that philosophically,” he said. “We ought to give more people more control over their money and their lives and that’s what we’re doing by these tax cuts.”

The new legislation will combine the low- and middle-income tax tables, provide a $60 non-refundable tax credit for Arkansans with an income of less than $24,700 and eliminate taxes for more than 100,000 low-income workers. The tax plan will also gradually lower the top tax rate for individuals from 5.9 percent to 4.9 percent during the next four years. 

However, the reduced rates are contingent upon not drawing money from the Catastrophic Reserve Fund (formerly the Long Term Reserve Fund). If the state has to access the fund, the tax rate reductions will cease.

The Arkansas House of Representatives and Senate this morning gave final approval to two identical bills — House Bill 1001 and Senate Bill 1 — before sending the legislation to the governor’s desk for his signature. 

The two chambers adjourned today, officially ending the 93rd General Assembly’s second special legislative session of the year, but it wasn’t without some controversy. Sen. Jason Rapert, R-Conway, and Rep. Mary Bentley, R-Perryville, both made a motion in their respective chambers to extend the session in order to consider abortion legislation. Their attempts were not successful.

Lawmakers will return to Little Rock for the start of the fiscal session Feb. 14, 2022. The session can last up to 30 days, which is Mar. 15, unless it is extended.

Antoinette Grajeda
Antoinette Grajeda

Antoinette Grajeda is Editor-in-Chief of Arkansas Soul, the host of the Affirmative Action podcast and a Northwest Arkansas-based journalist. She has covered race, culture, politics, health, education and the arts in Arkansas for nearly 15 years.