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Reducing Arkansas’s Income Tax Rate To Zero

By Caleb Taylor

Can Arkansas reduce its income tax burden to zero?

ACRE Scholar and UCA Associate Professor of Economics Dr. Jeremy Horpedahl outlines how Arkansas can accomplish gradually reducing its income tax rate to zero percent in “Getting to zero” published in the Arkansas Democrat-Gazette on June 28th.

Horpedahl writes that gradually reducing the rate over three decades would be a “prudent and realistic” way to eliminate the income tax.

Horpedahl writes:

One current proposal is to reduce the top income tax rate from 5.9 to 5.5 percent. This is in line with past tax reforms and could be a part of a long-run strategy to get to zero. Cutting the top rate by that much every year is easy to absorb in the budget, and after about 30 years we could completely eliminate the tax. That’s a long time to wait, but it is both prudent and realistic.”

Fall Special Session

Arkansas legislators are expected to reconvene in the fall for a special session devoted to congressional redistricting and income tax cuts.

Although a specific plan hasn’t been announced yet by Gov. Asa Hutchinson or legislators, now is the “perfect time” to consider long-term plans for further income tax reforms, according to Horpedahl.

Horpedahl writes:

We all enjoy many government services, and those must be paid for, but not necessarily with an income tax. However, moving away from an income tax requires careful fiscal planning. A special session on taxes is the perfect time to think about long-run plans, and whether Arkansas wants to move in the direction of having a zero percent income tax.”

Arkansas’s top income tax rate currently stands at 5.9 percent. That’s higher than every surrounding state besides Louisiana, according to the Tax Foundation.

You can read the rest of Horpedahl’s op-ed here.