LITTLE ROCK – The past year has been eventful for state government, and the development that may have the most positive long-term impact for the Arkansas economy was passage by the legislature of a $50 million-a-year tax cut for low income families.
Act 78 of 2017 will lower state income taxes for everyone whose income is less than $21,000 a year. People whose annual incomes are below $4,300 will be taken off the income tax rolls completely.
An analysis by the Bureau of Legislative Research estimates that Act 78 will reduce taxes for 1,346,415 Arkansas residents.
The legislature also eliminated state income taxes for retired veterans. Act 141 of 2017 exempts military retirement from state income taxes. About 29,000 Arkansas veterans served long enough to qualify for retirement benefits, and Act 141 will save them about $13.4 million a year.
Both tax reductions are expected to improve the Arkansas economy in various ways. First, much of the tax savings will be spent on groceries, housing and necessities instead of going into the state treasure. Secondly, state economists expect the tax cut for veterans to make Arkansas an attractive location for military retirees. If locations in Arkansas attract more veterans, those communities will benefit from their expertise and willingness to serve.
Act 465, also passed by the legislature earlier this year, exempts sales taxes for manufacturers when they purchase equipment for repairs and replacement of parts. It sunsets an existing tax incentive program known as InvestArk. The tax exemption will be phased in, beginning July 1, 2018.
The savings to manufacturers will begin accumulating in 2020, when the loss of InvestArk is more than offset by the sales tax exemption. In Fiscal Year 2020 the savings to manufacturers will be $230,000, but they will increase rapidly and in 2023 will be more than $12.3 million a year.
Because Arkansas had approved a medical marijuana amendment in November of 2016, the legislature had to create from scratch a totally new regulatory system. Lawmakers wanted to make sure that marijuana would be prescribed and sold handled like a medication, and they also wanted to make sure that the amendment would not become a gateway allowing easier access to recreational use of illegal drugs.
In all, the legislature considered 51 bills and enacted 25 that implement aspects of the medical marijuana amendment. There will be 32 dispensaries and five growers that will open for business in 2018.
Act 191 of 2017 was a priority of business leaders because it clarifies the legal position of employers in civil lawsuits. Under the act, supervisors acting on their own are not considered employers. The legal result is that lawsuits against employers will not be pursued under the category of hate crimes. The act creates a one-year limit in which discrimination and retaliation suits can be filed against employers.
Act 734 of 2017 is another priority of business leaders. It lowers the base wage on which employers pay unemployment insurance taxes, from $12,000 to $10,000. The change will save Arkansas businesses about $50 million a year. Act 734 also shortens from 20 to 16 weeks the length of time someone may receive unemployment insurance benefits.