An Arkansas tax invoice signed by Gov. Sarah Huckabee Sanders cuts taxes for firms and particular person taxpayers and supplies a brief non-refundable tax credit score to eligible residents. That is the second time Arkansas lawmakers have diminished revenue tax charges this yr. The state was capable of present this tax aid attributable to a $1.161 billion basic income surplus for the 2023 fiscal yr.
Some supporters of the revenue tax cuts, together with Randy Zook, president and chief government officer of the Arkansas State Chamber of Commerce, say the laws will create extra jobs and appeal to new residents. Nonetheless, others argue that the newly enacted tax aid primarily advantages the rich whereas taking state funding away from residents with decrease incomes.
Arkansas Advocates for Children and Families referred to the newest tax cuts as solely providing “meager advantages to most low- and middle-income taxpayers. The advocacy group cites an Institute on Taxation and Financial Coverage (ITEP) mannequin, exhibiting that Arkansas residents with common incomes over $1.6 million yearly would profit from a mean tax minimize of $3,409. Center-class Arkansas households making $52,000 would solely see a $35 tax minimize.
New Arkansas tax minimize invoice
The most recent Arkansas tax minimize invoice signed into legislation by Gov. Sanders on Sept. 14 additional reduces the state’s prime revenue tax price from 4.7% to 4.4%, (This price was beforehand diminished from 4.9% in April 2023.)
The brand new 4.4% tax price received’t take impact till 2024, so taxpayers whose incomes fall into the highest bracket are topic to the beforehand diminished price of 4.7% for 2023. Nonetheless, this can be a a lot decrease tax price than most states impose for his or her wealthiest earners.
- For taxpayers with revenue between $24,300 to $87,000, the brand new Arkansas revenue tax price of 4.4% will apply to incomes between $24,300 and $87,000.
- The 4.4% tax price will apply to incomes $8,801 and above for taxpayers whose incomes surpass $87,000.
So, what does this imply? Arkansas taxpayers with incomes above $87,000 pays much less revenue tax on a portion of their revenue than taxpayers with decrease incomes.
Moreover, all Arkansas firms with internet incomes over $11,000 pays a tax price of 4.8% (lately diminished from 5.1%) in 2024.
$150 tax credit score in Arkansas
Not like the revenue tax cuts, the Arkansas tax credit score of as much as $150 ($300 for joint filers) is retroactive to tax yr 2023. Which means eligible residents can declare the credit score once they file their 2023 Arkansas state tax return. The tax credit score is non-refundable, that means it could solely cut back the tax you owe reasonably than being credited within the type of a tax refund.
Who qualifies for the tax credit score? To qualify for the Arkansas tax credit score, taxpayers should meet the next standards.
- File a full-year 2023 Arkansas tax return.
- Have a internet revenue of $89,600 or much less ($179,200 or much less for joint filers) to obtain the total credit score quantity.
- Have a internet revenue that doesn’t exceed $103,600 ($207,200 for joint filers) for a diminished credit score quantity.
The tax credit score is short-term and is ready to run out for the 2024 tax yr. As a result of the credit score is non-refundable, it won’t profit Arkansas taxpayers who haven’t any state revenue tax legal responsibility, which is extra frequent for taxpayers with decrease incomes.
So, who advantages most from Arkansas’ tax cuts? Information present that wealthier residents will save essentially the most cash underneath the most recent spherical of revenue tax cuts in Arkansas. Arkansas taxpayers with the bottom incomes may save the least. (That’s partially as a result of these residents usually don’t owe state taxes.)