What do Arkansas’ latest tax cuts look like for the average taxpayer?

Rep. David Ray, R-Maumelle, scans paperwork during a special legislative session in Little Rock on June 17, 2024. Ray voted in support of the tax cut bills as they moved through the House of Representatives. (Mary Hennigan/Arkansas Advocate)

Republican lawmakers this week voted to again lower tax rates for Arkansans, marking one step closer to Gov. Sarah Huckabee Sanders’ goal of phasing out the state income tax entirely.

Data from the Arkansas Department of Finance and Administration shows the wealthiest of residents will fare the best. But what about the average resident — one who matches the state’s median household income of $56,335?

The legislation , now Act 1 of 2024, will lower the top corporate income tax rate from 4.8% to 4.3% and the top individual income tax rate from 4.4% to 3.9%, retroactive to Jan. 1 of this year.

Arkansas governor signs tax, appropriation bills after special legislative session ends

It was the third round of tax cuts in the last 15 months.

An expected 1.1 million Arkansas taxpayers will see a savings on their taxes, but the amount varies based on income. Scott Hardin, spokesperson for the Department of Finance and Administration, said the impact of the tax cut can be calculated by subtracting a 2024 tax rate from a 2023 rate.

Using the formula, taxpayers who report $200,000 in earnings should expect to see $1,531 trimmed from their annual taxes. The average Arkansan — someone who makes the median household income of $56,335 — should expect a saving that ranges between $200 to $280, according to state data.

Approximately 1.9 million people pay taxes in Arkansas, which leaves nearly 800,000 people who earn less than $25,000 unaffected by the recent tax cuts.

Those in opposition to the tax cuts, such as Democratic lawmakers and advocacy groups, said this week that the state should instead fund services to help curb issues like the high maternal mortality rate and childhood poverty .

“I know cutting taxes is easy, it’s great in an election year … but there are things we can do to more meaningfully help make life a little bit easier for everyday Arkansans,” Sen. Greg Leding, D-Fayetteville, argued before a vote on Tuesday.

The unknown cost of the school voucher accounts created by the Arkansas LEARNS Act were another reason Democratic leaders said they were against tax cuts.

For fiscal year 2025, lawmakers appropriated $97.5 million for the Educational Freedom Account Program, which is being phased in over three years. A Department of Finance and Administration official told lawmakers last year that the EFA program could cost $175 million in its third year when it’s open to all Arkansas students. The final cost could vary based on participation rates.

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