The Tax Reform and Relief Legislative Task Force met twice this week as they continue to study the impact of tax reform in other states across the country.
In addition to lowering the income tax rate for Arkansans making below $21,000 a year, The Tax Reform and Relief Act of 2017 created the task force to explore future tax reform. The task force is required to complete a report by September 1, 2018. The report will include proposals for tax cuts and job growth.
This week, the task force reviewed an extensive report comparing tax rates in Arkansas to those of surrounding states and those with similar populations and economic factors.
The first area compared was that of personal income tax.
Arkansas has 6 income tax brackets. For comparison, the state of Missouri has 10 income tax brackets, while Alabama, Kansas, Louisiana, and Mississippi have 3.
Eight states across the country have a flat tax rate. Flat rates range from 3.07% in Pennsylvania to 5.499% in North Carolina. Remaining states have a progressive tax with income brackets like Arkansas.
When it comes to sales taxes, Arkansas’s rate is at 6.5%. Surrounding states range from 4 to 7%.
When it comes to state corporate income taxes, most states (31) have a flat rate ranging anywhere from 3% to 9.9%.
Arkansas has 6 brackets for state corporate income taxes. The rates range from 1% to 6.5% depending on the income.
Since 2008, 18 states including Arkansas have cut their individual income taxes and 15 states have reduced their corporate income taxes. Several others have fundamentally remade their tax codes.
The task force heard extensive testimony from officials in North Carolina and Indiana where extensive reform has been made in recent years.
All of this information presented this week will be considered as the task force studies what is best for Arkansans. Any proposals made would likely be considered in the 2019 Regular Session.