In order for us all to thrive, families need to have good schools with great teachers to send their kids, businesses need talent pools of skilled workers to get their products to market and workers need roads and adequate infrastructure to get to work. Taxes are how we come together to pay for those things. All of us, regardless of income or ZIP code, contribute, and all of us benefit.
But Arkansas has an upside-down tax system, where Arkansans who earn less pay a larger share of their income in state and local taxes than the wealthy. Only income taxes ask the wealthy to pay more than the poor and middle class, and a decade of cuts to the personal income tax in Arkansas has shifted the burden of state services onto those who can least afford it by making our state budget more reliant on sales taxes.
In fact, our most recent economic forecast shows that our state already expects to bring in less revenue from personal income taxes than sales taxes this fiscal year, possibly for the first time ever.
Residents of our state perennially see some of the highest sales tax rates in the nation; currently, Arkansans face the third highest sales tax burden in the country. But since at least 2014, the Arkansas legislature has prioritized personal and corporate income tax cuts for the wealthy in nearly every legislative session. According to an analysis by the Institute on Taxation and Economic Policy, these cuts have totaled more than $1 billion annually, and the vast majority have gone to the Arkansans with the highest incomes:
Senate Bill 549 continues us down this path, shifting the burden of state government more onto everyday Arkansans, and further reducing revenues mostly to the benefit of high-income earners and wealthy corporations. ITEP estimates a cost of $115 million in revenue lost from cutting the top personal income tax rate to 4.7%, and 80% of those dollars lost in revenue would go to the top 20% of Arkansans:
A household in the top 1% would be getting back thousands annually, while most Arkansans might get a few dollars.
Somehow, it gets worse than that. The corporate tax cut portion of SB549 would cost $24 million according to ITEP, and nearly $20 million would be passed onto to wealthy out-of-state shareholders, leaving little left for Arkansan residents at any income level:
That $139 million annually could go a lot farther for a lot more Arkansans — particularly the $20 million that will be leaving our state entirely.
A higher share of mothers in Arkansas die within a year of having a child than in nearly any other state in the country, but we haven’t yet expanded Medicaid coverage for women after they give birth, something that would save lives and only cost the state less than $2 million annually. We’ve heard a lot about workforce issues this session, but modest investments to improve access to and the quality of preschool or early childcare didn’t pass — when even the U.S. Chamber of Commerce has explained that Arkansas’s lack of childcare costs our state hundreds of millions of dollars in economic activity annually. Rising wages haven’t kept up with the explosion in costs for things like housing for all workers, but our state’s housing trust fund continues to lack regular sources of funding.
Taxes help pay for the foundations of opportunity that create broadly shared economic prosperity. Each dollar lost in a tax cut for the wealthy is a dollar that can’t be used to make these critical investments. But imagine what our state might look like if we had the political will to invest hundreds of millions of dollars expanding these programs that benefit us all.