During the second half of his speech, the Governor outlined his priorities for this year’s fiscal session. He proposed a budget that he claims fully funds education; reduces the rate of growth in state Medicaid spending and the use of one-time funds for ongoing Medicaid needs; meets overall state’s budget; and creates a surplus that will be used as a cushion for future economic changes while generating funding for highways. However, as AACF has previously noted, the Governor’s proposed budget does not come close to meeting important budget needs for children and families in a range of areas, including pre-K, juvenile justice, afterschool and summer school programs, targeted tax relief for low-income families (like a state Earned Income Tax Credit), and adequate funding for K-12 education and facilities, to name but a few. Nor does it come close to meeting the state’s growing infrastructure needs for highways and roads.And then there's talk of a tax cut in 2019 — a huge one for a small percentage of the wealthiest Arkansans. Hutchinson would cut the top marginal tax rate from 6.9 to 6 percent, a 14 percent cut in the taxes taken on the top end.
The rate reduction in the individual income tax would also have major implications for tax fairness, and not in a good way. It would do little to change a state and local tax system that has low- and middle-income taxpayers paying nearly 12 cents in state and local taxes on every dollar they earn, nearly double the less than 6 cents on every dollar being paid by Arkansas’s wealthiest taxpayers. The Governor’s proposal also would eliminate what little progressivity remains in the personal income tax. A reduced top rate of only 6 percent for higher-income taxpayers (incomes greater than $75,000) would equal the top rate of 6 percent currently paid by middle-class taxpayers, those with net incomes between $21,000 and $75,000 (Act 78/79 of 2017).As I noted yesterday, based on 2013 figures, the most recently available, only 39,000 of more than 1 million tax filers made more than $100,000 that year, but they'd realize more than $100 million of the governor's $180 million tax cut — more than half the windfall to less than 4 percent of the filers.