How low can they go?

Governor Hutchinson today announced that he is delaying the special session on tax cuts. But tax cuts are almost surely in the pipeline, with some in the legislature hoping for cuts to the top rate from 5.9 all the way down to 4.9 (the governor has proposed a cut down to 5.3 percent by 2024).


Meanwhile, Arkansas Attorney General Leslie Rutledge has suggested putting a constitutional amendment on the ballot to ditch the state income tax for individuals altogether by 2030. Arkansas Lieutenant Governor Tim Griffin has also called for moving to eliminate the state income tax altogether. It didn’t go anywhere, but Sen. Trent Garner filed a bill during this year’s session to move the income tax rates to zero.

Over at Talk Business, University of Arkansas economist Mervin Jebaraj expressed skepticism that eliminating the income tax would lead to a business boom in the state:


I don’t know necessarily that zero income tax is what’s going to make Arkansas more economically competitive. What’s going to make Arkansas economically competitive is improving the standing of our workforce compared to our surrounding region and improving educational attainment in our state. Those investments I think have the greater value for economic prosperity in our state.

Check out his full interview above. Jebaraj suggests that the various infusions of federal cash during the pandemic may be creating a temporary boost in the state’s revenue picture. “That will eventually normalize,” he said.

That said, he also said that the state might actually be forecasting too conservatively:

The state has beat forecast estimates since about 2019…so the question needs to be asked if maybe we are forecasting maybe too conservatively, and we should up our revenue forecasts going into the future so the state, during the regular budgeting cycle, has a more accurate picture of what revenues are going to look like. And then the legislature can make decisions about what the greatest bang for the buck could be in economic development.

On the tax issue, Rep. Andrew Collins (D-Little Rock) offered some perspective over the weekend:



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