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Arkansas House gives final OK to $97M tax cut plan

February 14, 2019

LITTLE ROCK, Ark. (AP) — Arkansas lawmakers gave final approval Thursday to a $97 million plan to cut the state’s top income tax rate, handing the governor a victory on a key agenda item after initially facing resistance from some fellow Republicans over inaction on highway funding.

The House voted 82-14 in favor of Gov. Asa Hutchinson’s proposal to cut the top income tax rate from 6.9 percent to 5.9 percent over the next two years. The measure, which the Senate approved last week, now heads to Hutchinson’s desk. Hutchinson’s office said he plans to sign the measure into law next week.

Hutchinson was re-elected in November after campaigning on a promise to push for more tax cuts. Lawmakers approved Hutchinson’s proposals to cut income taxes for low- and middle-income residents in his first term.

“The immediate benefit of these historic reductions is that Arkansans keep more of their paychecks,” Hutchinson said in a statement. “The long-term benefit to all Arkansans is that the lowered tax rate puts us in the same bracket with most of our neighboring states, which is significant to CEOs who want to move into other states.”

State finance officials say approximately 579,000 taxpayers with net taxable incomes of $38,200 will receive a cut under the proposal, though critics have said the benefits are skewed heavily toward the state’s highest earners. Arkansas’ top income tax rate is higher than its surrounding states, while Texas has no income tax.

Leaders of the majority-Republican House had been uncertain whether Hutchinson’s tax cut plan had the votes needed, with several GOP members earlier this week opposing the measure and venting frustration over lack of movement on highway funding. Hutchinson this week unveiled a $300 million highway funding plan that was aimed at easing those concerns.

“It’s important we move forward so we can also take care of our highways,” Republican Rep. Marcus Richmond, the House majority leader, told lawmakers before the vote.

Nine Democrats voted with 73 Republicans for the tax cut plan. No GOP lawmakers voted against the measure, although two voted present — which has the same effect as voting against a bill.

The measure was approved the same day a House panel rejected an effort by Democrats to create a tax credit for low-income residents. House Democrats have said they’re worried the tax cuts are coming at the expense of other state needs that are being underfunded.

“We can’t continue to kick the can down the road on these critical state needs and think we can cut into our revenue and then deal with those issues later, and then expect there to be major changes in the way we attract business or encourage Arkansans to start small business,” Democratic Rep. Vivian Flowers said on the House floor before the vote.

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