With the legislature in a death rattle over COVID legislation, more trouble looms — a coming special session at which the governor and Republicans are hungry to cut the state income tax.
Now comes Arkansas Advocates for Children and Families with a report on the impact of the plan, which includes a cut in the top tax bracket from 5.9 to 5.5 percent on income over $82,000.
Analyses by the Institute on Taxation and Economic Policy (ITEP) show that plans to cut the top income tax rate would largely benefit Arkansans with the highest incomes and cost hundreds of millions in annual revenue.
ITEP estimates that cutting the top tax rate from 5.9 percent to 5.5 percent would cost the state $138 million annually. The top 5 percent highest-income Arkansans – those making more than $218,000 a year – would receive more than $93 million, or 68 percent, of this tax cut. The 40 percent of Arkansans making less than $37,000 would get nothing at all.
The ITEP also looked at the plan to reduce the tax tables to two categories — one below and one above $82,000 — and came up with a somewhat costlier figure than Moody’s Analytics presented to the legislature earlier this week. It said it would reduce annual revenue by $301 million. It WOULD, however, reduce the share of the benefits enjoyed by the wealthiest taxpayers. More than half of the dollars still would go to the top 20 percent of taxpayers, those making more than $98,000 (or as much as $196,000 for a married couple filing separately on the same return).
Some want to cut the top tax rate even more, to 4.9 percent. This would cut state revenue by a half-billion a year by 2026 and half the money would go into the pockets of the top 5 percent (more than $218,000 and even more for two-income married couples).
The poor get pennies, at best, in all these plans.
The point, of course, is that there are alternatives to putting more money in the pockets of millionaires. Said the Advocates:
Successive cuts to the top tax rate are costly and benefit the rich. Policymakers should reject them, and instead look to invest our state’s revenue in ways that benefit the vast majority of working Arkansans.