Gov. Asa Hutchinson
rebooted his income tax proposal today to make it a reduction in the top marginal rate from 6.9 percent to 5.9 percent over two years, at a final cost of about $97 million in revenue.

He’d cut the rate to 6.6 percent effective Jan. 1, 2020 and 5.9 percent effective Jan. 21, 2021. This means a cut of $25 million for the last six months of the fiscal year that begins July 1.


Hutchinson emphasized at a news conference tax cuts provided in previous years on the lower end of the income scale and also emphasized the need to be competitive with neighboring states with lower income tax rates. He offered no evidence that marginal tax rates account for significant impact on decisions on places to live or locate a business.

Hutchinson said there was sufficient income anticipated in the coming fiscal year to absorb the tax cut and still leave an $11 million surplus.


The governor didn’t immediately release tables that explain the reduction in tax savings from his original plan that would have cut taxes by almost $200 million annually at the end, of a four-year phase-in, in part by simplification of tax tables across all income levels. The discovery that the original plan produced tax increases at some income levels led to this reworked plan.

There will be no dollar tax increase for anyone in this bill, Senate leader Jim Hendren said, but some increases in tax rates will be experienced at the various income brackets. That means the legislation will still require a three-fourths vote for approval.


Given the nature of income distribution, it’s likely that the dollar benefit will be concentrated at the higher end of the income scale. The original plan gave 50 percent of the benefit to the top 1 percent of income taxpayers, those making more than $500,000 a year. This bill, at the end, amounts to a 15 percent cut in income tax on all income over roughly $80,000. The more you make the more you save.

This is going to take some study to analyze. Perhaps by design, little information was produced to explain the change in numbers and no information at all was presented on where the dollar benefits will fall. Arkansas Advocates for Children and Families and others can be expected to get out their calculators after the legislation is filed.

I’m still just speculating: But …. if the net tax cut is cut in half, but those making more than $80,000 still get the anticipated 15 percent tax cut on income at that or higher levels in two years, doesn’t that have to mean the earlier anticipated tax cuts for people making less have been done away with? That does NOT mean they are getting an increase over what they pay now, only that an earlier anticipated cut has gone away for middle-income people. Right? I”m trying to get some answers.

UPDATE: I’m told, for one thing, that they are jettisoning the big increase in the standard deduction. That will save money. But it will also take away promised tax cuts at lower income levels. Rather than simplifying brackets, they’ll keep brackets for low, middle and higher-income, with the top rate at 5.9 percent. Hard to see how this doesn’t end up with, again, the dollar savings concentrated at the high end.


UPDATE II: Here’s part of the explanation offered on how they cut the savings, but preserved a whopping cut at the top end.

UPDATE III: My legislative source says a small number of people at the “upper end of the middle-income brackets” should see a small tax cut. Otherwise, the cut will all go at the top end. But, he emphasizes, as the governor did: Nobody will get a tax increase.