On Friday, Governor Sarah Sanders announced she was calling a special session of the Arkansas legislature to consider, among other things, additional income tax cuts. This is welcome news for Arkansas workers, small business owners, and those struggling to make ends meet in the Biden economy.
Opportunity Arkansas has been on the record in support of a special session since the fiscal year ended at the end of June and it was announced that Arkansas would have yet another $1 billion-plus surplus.
But within mere moments of the governor’s announcement, the radical Left went right to work, misleading the public about what the governor's tax plan will do and resorting to tired talking points about “tax cuts for the rich.” These mistruths simply cannot go unaddressed, so please allow us to set the record straight.
(Today, we’ll share the truth about the proposed personal income tax cuts. Tomorrow, we’ll tackle the small business tax cut myths.)
First, let’s lay some groundwork. Here’s the skinny on the tax cut package that’s being proposed, which has been filed as HB1007 / SB8:
Now, according to the Left, these are nothing more than tax cuts “for the rich.” But there’s a lot they’re not telling you, including the fact that many Arkansas families who are in poverty are taxed at the highest rate.
Much of the noise around Arkansas’s next round of income tax cuts has revolved around the fact that the cuts will apply to the state’s highest personal income tax bracket. The opposition simply says “highest” or “top” bracket, giving the impression that the tax cut is only for “the rich.” Or, in some cases, they just outright say that these are “tax cuts for the rich.”
These claims, quite simply, are false: what the loud opponents of commonsense tax relief are not telling you is that Arkansas’s top personal income tax rate kicks in at just $24,300.
Sure, that tax bracket also includes folks earning much more than that, but where it begins is a significant factor that is being very conveniently overlooked.
These numbers should also be considered in context:
So why does the Left continue to mislead the public and insist that the proposed tax cuts are “for the rich”? Do they really believe Arkansas families earning $25,000 per year are “rich”? Do they really want them to pay higher taxes? We don’t.
In reality, there are thousands of middle class Arkansans who will benefit from the proposed tax cuts, many of whom own small businesses or are struggling to make ends meet right now. Instead of gaslighting, the Left should be celebrating this fact.
Opponents of commonsense tax relief would also have you believe that the proposed tax cuts come at the cost of the poor, or that they’re somehow tilting the scales in favor of “the wealthy.”
But in reality, the very poorest Arkansans already pay nothing or next-to-nothing in state income taxes.
Meanwhile, Arkansans who the Left calls "the rich"? They already pay more than their "fair" share of taxes.
Another conveniently overlooked fact about the current tax code in Arkansas is that “the rich” – a.k.a. those in the highest tax bracket – already pay a higher rate on most of their earnings than most Arkansans do. And, to make matters worse, they pay a higher rate on more of their money than other Arkansans do.
Because of the way the tax brackets are structured, high-income Arkansans hit the top income tax rate much more quickly than low-income Arkansans. As a result, much more of their income is taxed at the highest rate.
In fact, an Arkansan earning $25,000 will pay the top rate on less than three percent of their income. But an Arkansan earning ten times that – $250,000 – will pay the top rate on nearly 97 percent of their income.
That’s because “high income” Arkansans (which starts at just $24,300) are in the highest tax bracket, while lower earners have much of their income exempted from any tax, and pay a lower rate on the rest.
Quite simply, so-called “rich” Arkansans who are in the highest tax bracket pay a higher rate on more of their money than the rest of Arkansans. That strikes me as much more unfair than the reforms being currently proposed. In fact, the proposed changes will make Arkansas’s tax code more fair, not less.
The latest proposed tax cuts are good news for all Arkansans. They will move us even closer to eliminating the state income tax altogether, which is good for every single Arkansan. It will mean more good-paying jobs, relief for small businesses, and help for struggling Arkansas families.
Not only does Arkansas's income tax inherently punish hard work, but it's also full of tax cliffs that punish workers for bettering themselves: earning slightly more can subject Arkansas workers to higher marginal tax rates.
This is wrong. It’s a tax on hard work. And it’s prolonging generational poverty and dependency for our neighbors, those we should be trying to help.
We are are also surrounded by two states (Tennessee & Texas) that have no personal income taxes. Our work-punishing income tax makes us less competitive and hurts our ability to recruit good-paying jobs.
Ultimately, the quicker we can get to zero income tax, the better. That's, by far, the best thing we can do to help Arkansans climb out of poverty, help them make ends meet, and create better lives for themselves and their families.
Thankfully, this latest tax reform proposal is another great step in that direction.