The Arkansas Tax Relief and Reform Task Force met this week. This is the third meeting for the task force which was created in the last legislative session. The purpose of the task force is to identify areas of potential reform within the tax laws of the state and to recommend legislation for consideration during the 2019 Regular Session.
The task force is considering proposals to hire consultants to research the implications of tax overhauls in other states. In the meantime, members heard testimony from the National Council of State Legislatures (NCSL) comparing Arkansas’s current tax structure to surrounding states. Tax rates were compared to those of Texas, Louisiana, Mississippi, Tennessee, Oklahoma, Missouri and the U.S. average.
Currently Arkansas’s revenue relies:
·23.4% on Individual Income Taxes
·3.6% on Corporate Income Taxes
·18.09% on Property Taxes
·12.5% on Selective Sales Taxes (fuel, tobacco, etc,)
·37.5% on General Sales Tax
·5.1% on other taxes
The average of states nationwide relies:
·22.9% on Individual Income Taxes
·3.7% on Corporate Income Taxes
·31.3% on Property Taxes
·11.4% on Selective Sales
·23.3% on General Sales Taxes
·7.5% on other taxes
State economies vary making tax structures unique. That is why taking a look at surrounding states provides valuable information.
Among nearby states there is a common theme of a reliance of sales tax, low reliance on property tax and low to moderate excise tax rates.
In Arkansas, personal income tax is divided into 6 brackets depending on one’s income. In testimony presented this week, we learned Mississippi has three brackets for all income earners while Missouri has 10.
When it comes to selective taxes, motor fuel taxes in Arkansas rank just below the U.S. median with $0.218/gallon. Tennessee’s is slightly higher at $0.254/gallon and Oklahoma is the lowest among surrounding states at $0.17.
When it comes to cigarette taxes, Arkansas again falls below the U.S. median but higher than most surrounding states.
One area of study for the task force will be the implementation of tax cut triggers. Tax triggers are when tax cuts only take effect when revenue meets an established threshold. They have been used by states including Missouri and North Carolina.
We have posted a complete report of the findings on our website www.arkansashouse.org. As the final recommendations of this task force could have implications for many families and businesses in the state, we will continue to keep you updated on their research and findings.