Legislators holds special three-day session

Arkansas families and businesses are projected to save over $483 million in income taxes next year due to a tax cut enacted by the legislature in a special three-day session.

Additionally, Arkansas homeowners will benefit from a decrease in property taxes of approximately $46 million following the legislature’s decision to raise the homestead property tax credit from $425 to $500.

The significant income tax reduction comes from Senate Bill 1, which cuts the top individual income tax rate from 4.4 percent to 3.9 percent for roughly 1.1 million Arkansas taxpayers. This is expected to result in a $384.2 million saving for taxpayers next year and $256.1 million annually thereafter. The initial savings are greater as they encompass 18 months, from January 1, 2024, to June 30, 2025.

Subsequently, the annual savings will amount to $256.1 million. Many legislators have expressed the need to lower or even eliminate income taxes to keep Arkansas competitive with neighboring states, asserting that each tax reduction aids in attracting industry to the state.

Furthermore, the Senate bill reduces corporate income taxes by lowering the top rate from 4.8 percent to 4.3 percent, which will save Arkansas businesses about $99.3 million in the first 18 months and approximately $66.2 million each fiscal year thereafter.

An estimated 7,800 corporations will receive a tax cut, as per the fiscal impact statement from the state Department of Finance and Administration.

Property tax reductions will commence from the assessment year starting January 1, 2024, due to the increased homestead property tax credit, saving homeowners around $47 million in the second full year of its implementation.

The legislature convened in a special session to finalize the budget for the state Game and Fish Commission before the end of the current fiscal year on June 30. Without an approved budget, the agency would have lacked the authority to allocate any funds as of July 1.