Gov. Hutchinson Signs Low-Income Tax Cut Into Law

Feb 1, 2017

Gov. Asa Hutchinson signs into law a $50 million tax cut for those making below $21,000 a year.
Credit Chris Hickey / KUAR News

Arkansas Gov. Asa Hutchinson has signed into law a $50 million income tax cut that primarily affects people earning below $20,999 a year.

Under Act 79 of 2017, cuts to the affected income earners’ marginal tax rate would start in 2019. The law also commissions leaders of the Arkansas Senate and House of Representatives to appoint members of a 16-person task force to consider future tax legislation.

At a bill signing ceremony Wednesday, Gov. Hutchinson said the tax cut is a “boost to the economy” because the more than 650,000 Arkansans who are projected to benefit will have “more money in their pocket.”

“This is the most conservative and responsible tax cut that we can have and continue down the path of lowering our rates,” Hutchinson said. “It is $50 million. There were many that wanted higher levels of tax cuts. There were many other different tax bills. We focused on this and said this is what we can afford.”

Under the new law, called "The Tax Reform and Relief Act of 2017," people making up to $4,299 annually would see their state tax rate cut from 0.9 percent to zero percent. Those making between $4,300 and $8,399 annually would see their rates cut from 2.4 to 2.0 percent. Arkansans making between $8,400 and $12,599 a year would see their rate cut from 3.4 to 3.0 percent. Those earning between $12,600 and $20,999 on a yearly basis would see a full percentage point reduction from 4.4 percent to 3.4 percent.

The law also cuts the marginal tax rate for income earners who make between $21,000 and $75,000. They will see the tax rate for the first $4,299 of their income reduced from 0.9 percent to 0.75 percent.

Republican Rep. Mathew Pitsch of Fort Smith and Republican Sen. Jim Hendren of Gravette were the primary sponsors of the legislation. Hendren is also the Senate Majority Leader and the Governor’s nephew.

Hutchinson said he hopes the resulting task force would seek to recommend further tax cut legislation. The law requires the task force to issue reports by December of 2017 and again by September of 2018 on any recommendations.

The Governor expressed confidence in the levels of general revenue coming into the state, despite Department of Finance and Administration reports showing revenue falling short of projections in five out of six months.

“Because projections are not as scientific as we would like—there’s an art form there—you always want to be somewhat cautious,” Hutchinson said. “I’m mindful of the history of Arkansas and the importance of a balanced budget and a conservative budget. And for all those reasons and for the irregular month-to-month reports, I said let’s take a conservative approach this year.”

In the 2014 election, Hutchinson campaigned on a promise to cut income taxes for most income brackets. In 2015, he signed into law a $100 million dollar tax cut that affected mostly middle and high income-earners.