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Arkansas Senate approves income tax rate cut, lowering top individual rate to 3.7%
Summary
The Arkansas Senate on May 5 passed Senate Bill 1, a proposal to lower top individual and corporate income tax rates, after floor debate over fiscal trade-offs; the measure passed 29–6 and will be transmitted to the House.
The Arkansas State Senate passed Senate Bill 1 on May 5, approving legislation to reduce state income tax rates for individuals and corporations. The final vote was announced as 29 in favor and 6 opposed, and the bill was ordered transmitted to the House.
Senator Dysmang, sponsor of Senate Bill 1, said the measure continues a multiyear trajectory of income tax reductions that began in 2013. "This lowers the top rate from 3.9% to 3.7%. That will be retroactive, because we are running a surplus," he said, and added the bill reduces the corporate rate to 4.1% effective the following year.
Opponents on the floor argued the revenue loss would limit spending on priorities they described as urgent. "Because we're cutting a $180,000,000 from our revenue that we could spend on other items," said Senator Tucker, who said he would vote no. Tucker urged investment in early childhood education, maternal health and hospitals, noting a reported wait list of roughly 3,000 children needing early childhood seats.
Senator Flowers questioned where lost revenue would be made up and raised concerns about the state's exposure to federal deficits and reliance on federal funds. Senator Dysmang answered that the state has preserved set-asides and conservative budgeting, citing what he described as a $100,000,000 set-aside for Medicaid and $70,000,000 set-aside for Educational Freedom Accounts (EFAs) to address potential needs tied to the tax cut.
Senator McKee, speaking for the bill, said returning revenue to taxpayers gives individuals and communities discretion over spending: "I believe it's putting it back in the hands of the people that produce it," he said.
After closing remarks from Senator Dysmang — who said a family earning $65,000 annually has seen its effective tax rate fall by 45% since 2013 and estimated that family now has about $1,600 more in disposable income because of prior tax reductions — the Senate proceeded to a roll-call vote. The presiding officer announced the bill passed by a vote of 29 yes to 6 no and directed the bill be transmitted to the House.
The Senate also recorded a procedural notice that the Revenue and Tax Committee would meet roughly 15 minutes after the House adjourns, contingent on the House passing and transmitting its version of the tax bill. The Senate adjourned subject to the reading of a House bill across the desk and clearing of the desk until 9 a.m. May 6.
