Sen. Jim Hendren Tweets from the state’s tax-cutting task force meeting this morning that the group had backed the plan preferred by Gov. Asa Hutchinson to phase in a change in the state income tax to three rates with a drop in the top rate from 6.9 percent to 5.9 percent.

This means a 14 percent reduction in the income tax on top-dollar income, a whopping windfall for the richest Arkansas taxpayers, as I noted earlier based on 2016 data from the state Finance and Administration Department.

Advertisement

The chart at top comes from material distributed at the meeting this morning, with its cumulative almost $200 million reduction in general revenue over the phase-in.

Previous data indicates the bottom 38 percent of taxpayers would get no cuts — actually a tax rate increase for the very poorest that is supposedly to be offset by an increase in the standard deduction.

Advertisement

About half of the taxpayers, the 638,000 making between $20,000 and $80,000, would realize about 25 percent of the savings, an average of $75 each.

The top 13 percent of taxpayers, 170,000 taxpayers, would get 75 percent of the benefit, an average of $850 each. But, as I wrote in the linked article, that average is misleading when you consider the enormous benefits enjoyed by the truly wealthy. By rough calculation, 1 percent of taxpayers would realize 60 percent of the tax cut.  A Sam Walton child domiciled here will realize a savings of $250,000 on tax on stock dividends alone.

Advertisement

How to pay for it? Cut home care for the disabled. Cut transportation for the sick and poor. Throw working people off Medicaid for failure to penetrate the computer reporting system. Short schools on adequacy funding. Short the workforce that tries to transition prisoners back into productive society. Cut state jobs (except if a Republican politico needs a featherbed to fatten his state retirement or DHS needs another lobbyist. And so on.

But we have also been promised, as governors in Kansas and Louisiana overpromised, that economic prosperity would follow significant income tax reductions.

Here’s a handy chart from 2016 returns on how much tax is paid by income category. The top rate of 6.9 percent currently kicks in at $35,100.

UPDATE: Here’s a reminder of a thorough analysis done by Arkansas Advocates for Children and Families that shows how disproportionately the rich prosper and the poor and middle class get little or nothing from this tax cut plan. The top 5 percent ($200,000 and up) get 65 percent of the benefits. The top 1 percent gets almost half.

Advertisement