The likely proposal for the long-discussed special session seems to have settled, and its main feature would be to cut the top personal and corporate income tax rates. This disproportionately benefits the wealthy, and the corporate income tax cut will largely be captured by out-of-state shareholders, meaning the revenue will leave the state economy entirely. That increases the risk that, rather than inducing economic growth, the tax cuts will actually shrink the state economy.
According to an analysis by ITEP, nearly 80 percent of the corporate income tax cut in Arkansas would go to the top 20 percent of earners once fully phased in. But even this underestimates the problem. ITEP estimates that this would cost $79 million in annual revenue, but only $15 million would go back to Arkansans at any income level. That means the vast majority of those who benefit from this tax cut won’t even live in Arkansas.
Proposed changes to personal income tax rates would cost more than $520 million and the top 20 percent of earners in Arkansas would get 73 percent of the personal income tax cuts once fully phased in.