Governor Asa Hutchinson joined legislative leadership this week to announce details of his plan to reduce Arkansas’s top marginal tax rate from 6.9 percent to 5.9 percent in only two years.
The 5.9 Tax Cut Plan allows the state to lower its tax rate by a full percentage point for nearly half the cost of earlier proposals. In addition, the plan will significantly flatten and simplify the state’s top income tax bracket.
“I am pleased with the work that legislators have put in to help us finalize the 5.9 Income Tax Cut Plan,” Governor Hutchinson said. “This is the next necessary step in reforming our tax code so that we can compete with other states in recruiting new business and retaining the companies that already are here.
“This is the third phase in my tax-reduction plan, which began with the biggest income tax cuts in the history of Arkansas in 2015 and 2017. I want to emphasize that under this plan, no one will pay more in income taxes. This plan, combined with the next reduction in the grocery tax, will allow more Arkansans to keep more of their paycheck."
The 5.9 Tax Cut Plan will continue the Governor’s commitment to provide substantive tax relief for all Arkansans and will accomplish this goal without cutting funding from major programs like prisons, public schools or the state’s health care system.
Since 2015, 90 percent of all Arkansas taxpayers have received a tax cut. Governor Hutchinson led the initiative to provide tax relief to middle income taxpayers by signing the $100 million tax cut in 2015, the largest income tax cut in Arkansas history. This tax cut was implemented in 2016. Governor Hutchinson enacted the second-largest income tax cut in Arkansas history in 2017 by signing the $50 million tax cut for lower income taxpayers. This tax cut will be implemented this year. Cutting the top marginal tax rate is the next step in the state’s goal to reduce the tax burden for all taxpayers.
At 5.9 percent, Arkansas’s top marginal tax rate will be less than Louisiana, will match Missouri, and will be in line with the top marginal tax rates of other states. This economic advantage, combined with the state’s low cost of living and doing business, will put Arkansas on a more competitive economic footing with its surrounding states.