Arkansas governor proposes $50M in tax cuts in new budget

November 10, 2020 GMT
Arkansas Gov. Asa Hutchinson speaks remotely to legislators on Tuesday, Nov. 10, 2020 in Little Rock, Ark., about his proposed budget for the next fiscal year. Hutchinson is proposing $50 million in tax cuts in his budget plan. (AP Photo/Andrew Demillo)
Arkansas Gov. Asa Hutchinson speaks remotely to legislators on Tuesday, Nov. 10, 2020 in Little Rock, Ark., about his proposed budget for the next fiscal year. Hutchinson is proposing $50 million in tax cuts in his budget plan. (AP Photo/Andrew Demillo)

LITTLE ROCK, Ark. (AP) — Arkansas Gov. Asa Hutchinson on Tuesday proposed a nearly $5.9 billion budget that calls for $50 million in tax cuts, including a tax break for new residents in the state.

Hutchinson detailed his budget proposal to lawmakers ahead of the regular legislative session that is set to begin in January.

“This budget sets the foundation for continued growth of our economy, it sets the stage for continued improvements in education and, I hope, increased salaries for teachers,” Hutchinson said. “It supports our state police and gives us a healthy cushion in savings for the unpredictable times in life.”

The Republican governor discussed his proposals in the middle of a coronavirus pandemic that has claimed more than 2,112 lives in the state. Despite the pandemic, Arkansas’ revenue has come in above forecast over the past several months.

The pandemic has also changed operations at the Capitol, where 11 lawmakers have tested positive in a recent outbreak. Hutchinson spoke remotely to lawmakers, who wore face masks as they sat behind plexiglass partitions.

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Hutchinson’s proposal calls for reducing sales taxes on vehicles priced less than $10,000 from 6.5% to 3.5%, and cutting income taxes for new residents to 4.9% for five years. Hutchison said the tax cut for new residents will help the state’s economic development efforts by creating an incentive to move to the state, but said it would also help move the state toward his goal of cutting the top tax rate to 4.9%.

Hutchinson’s plan also includes $25 million in unspecified tax cuts for low- and middle-income residents that his office said will be developed with the Legislature.

The budget plan calls for tapping into $217 million of the state’s nearly $241 million in surplus funds, with $25 million going toward Hutchinson’s proposed tax cuts. It also proposes sending $100 million from the surplus to a long-term reserve fund, $28.5 million for school facilities and $30 million for rural broadband.

The proposed budget increases spending 2.8%, with the largest increases going toward public schools, human services, and colleges and universities.

Hutchinson’s budget plan didn’t address the potential impact of the U.S. Supreme Court striking down the Affordable Care Act. About 290,000 people receive coverage through the state’s version of expanded Medicaid under the federal health law.

Hutchinson later said he expected Congress would act in the wake of any ruling, but said Arkansas would have to take its own steps if Congress didn’t. State officials said a repeal could have a significant impact on the state’s budget.

“We would have to have some time to actually think through all the implications,” Department of Human Services Secretary Cindy Gillespie told lawmakers, saying it would affect more than just the people who benefited from the Medicaid expansion.

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Follow Andrew DeMillo on Twitter at www.twitter.com/ademillo