Arkansas lawmakers advance income tax cut
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The Arkansas Senate and House of Representatives on Tuesday quickly OK'd identical bills that would trim income tax rates for individuals and corporations by 0.2%.
Why it matters: About 1.1 million taxpayers and 7,800 corporations would get a rate cut, the state Department of Finance and Administration estimates.
- Arkansas' general revenue would drop by $191.8 million in fiscal year 2027 and $144.8 million in fiscal 2028 following the cuts, the department said.
Friction point: Supporters say a lower rate would put more money in the pockets of Arkansans, but opponents say less revenue would disproportionately affect lower-wage earners by not fully funding social services that act as safety nets.
The big picture: The Arkansas Legislature convened Tuesday for a special session called by Gov. Sarah Huckabee Sanders last week specifically to deal with state income taxes.
- The bill continues Sanders' push to phase out income taxes and would be the fourth cut since she took office in January 2023.
By the numbers: The bill would set a new top individual income tax rate of 3.7%, down from 3.9%, which would be retroactive to Jan. 1, 2026.
- It would also lower the top corporate income tax rate from 4.3% to 4.1%, starting Jan. 1, 2027.
What they're saying: "By lowering taxes, we are giving workers a pay raise, letting them keep more of each paycheck, putting their hard-earned tax dollars back in their pocket," Rep. David Ray (R-Maumelle) said.
- "If we doubled the budget tomorrow, [opponents] would still find things that they say are not — quote — fully funded," he said.
The other side: "The reality is, these benefits don't scale evenly," Rep. Ashley Hudson (D-Little Rock) told House members, claiming most residents would see only pennies per day in savings.
- About $25 million in corporate tax cuts would go out of state, she said. "That's not relief …. What it is is a sound bite … and frankly, it is an insult to the people of Arkansas."
- She said the state could use the money to help fund programs for postpartum moms, SNAP benefits, struggling farmers and rural hospitals.
A lower tax rate for residents and companies would also make Arkansas competitive while working to attract good-paying jobs, Ray said.
State of play: Arkansas' general revenue collections in April increased $138.9 million from the amount collected in April 2025 to $1.07 billion, per a report from the state Department of Finance and Administration.
- The jump was fueled largely by individual income tax collections, which were up 6.6% from last year.
- The state's net available general revenues for fiscal year 2026 totaled $832.4 million at the end of April, up $184.5 million from last year.
What's next: Both chambers convene again Wednesday morning to vote on the other's bill before the bills are sent to Sanders to sign into law.