Net Tax Increase: New Tax Laws from the 92nd Arkansas General Assembly
This article will show you how the Arkansas legislature passed new tax laws that result in a net tax increase on the people of Arkansas over the next few fiscal years. If the half percent sales tax increase proposed by the legislature on the 2020 general election ballot passes, there will be massive annual tax increases of over $200 million per year.
Governor Asa Hutchinson decreed the 92nd General Assembly as the “greatest of all time” for Arkansas.[1]
While there were some good tax decrease measures passed this session, they are overcome by the tax increase measures passed. Below are short descriptions the major tax law changes and their fiscal impacts to the state.[2]
|
Act/Bill |
Description |
Revenue Impact
Fiscal Year 2020 |
Revenue Impact Fiscal Year 2021 |
|
Act 822 (SB576) |
Internet Tax 2.0, Corporate Tax Reform, Car Wash Fees/Tax | $43,819,363 | $39,773,439 |
|
Act 580 (HB1565) |
Cigarette Paper Tax Increase, Raise Smoking Age to 21, Remove Border Exemption Pricing | $720,000 |
$630,000 |
|
Act 416 (SB336) |
Gas Tax Increase | $57,580,907 |
$86,124,496 |
| HJR1018 | New Half-Percent Sales Tax | –[3] |
– |
|
Act 182 (SB211) |
Income Tax Cut | ($25,600,000) |
($74,100,000) |
|
Act 808 (SB447) |
Homestead Property Tax Credit | ($12,500,000) |
($12,800,000) |
|
Act 660 (HB1564) |
Increased Cell Phone Fees | $10,100,000 |
$10,100,000 |
|
Act 788 (HB1737) |
Raising Water Bill Fees | $1,000,000 |
$1,000,000 |
|
NET TAX INCREASE |
$75,120,270 |
$50,727,935 |
|
*Those in parenthesis are decreases. Revenue numbers are from the Arkansas State Government (DFA, Dept of Health)
OVERALL NET TAX CHANGES:
- FISCAL YEAR 2020: $75.1 million NET TAX INCREASE
- FISCAL YEAR 2021: $50.7 million NET TAX INCREASE
- FISCAL YEAR 2024: $290.7 million NET TAX INCREASE
- FISCAL YEAR 2029: $246.3 million NET TAX INCREASE[4]
More Details on the new tax laws passed in the 92nd General Assembly:
- Income Tax Cut: $97 million income tax cut phased in. Drops the top income tax rate from 6.9% to 5.9% over three years. This will be phased in over three fiscal years.
- Gas Tax Increase: raises per gallon tax to 24.4 cents per gallon (28.5 cents per gallon diesel). New annual fees: $100 for hybrids, $200 for electrics. $95 million per year increase for roads. This goes into effect in October 2019.
- Half Percent Permanent Sales Tax: Proposed constitutional amendment to create a permanent, half percent sales tax in the constitution for roads. $293 million ANNUALLY if passed in November 2020 general election.
- Internet Sales Tax + Corporate Tax Cuts: together in the same bill, a new internet sale tax (July 1) plus lowering of corporate income tax rate from 6.5% to 5.9% and extension of a net operating loss carry-forward from five years to ten years. Also new single sales factor apportionment. The tax decreases are phased in over the next decade. The Internet Tax 2.0 applies to almost all internet transactions, including third party sellers. The official estimate is likely way underestimated according to actual internet sales statistics.
- Homestead Tax Credit Increase: Increases tax credit for homestead properties by $25 per year from $350 to $375. The bill that passed also raided the property tax relief trust fund to move the money into the long-term reserve fund.
- Increased Cell Phone & Water Fees: Increases cell phone fees for emergency services; increased public water fees.
- Cigarette Paper Tax Increase: raised the smoking age to 21, increased taxes on cigarette papers, removed border city pricing exemptions.
These tax increases come at the same time the state is seeing record revenue, and hundred of millions of dollars in surplus money.[5][6]
At the end of the session, based on the actions of a super-majority of Republicans, the people of Arkansas are lined up to pay more money to the government, causing government to grow even larger.
[1] https://www.arkansasonline.com/news/2019/apr/18/hutchinson-touts-success-of-19-session-/
[2] Fiscal Impact Statements and all revenue numbers are from the Arkansas Department of Finance and Administration
[3] If the half percent sales tax constitutional amendment passes, the first fiscal year of effect is 2024. The ongoing, annual tax increase is $293.7 million per year.
[4] For Fiscal Year 2024 and 2029 assumes the half percent sales tax passes as supported and approved for ballot access by the Arkansas General Assembly.
[5] https://www.nwaonline.com/news/2019/jun/04/arkansas-surplus-nearing-175m-as-fiscal/
[6] https://www.nwaonline.com/news/2019/may/03/revenue-in-april-a-record-for-state-201/
