House Passes Tax Cut Measures
Members of the 89th General Assembly passed a cut tax package in the final week that saves Arkansans $10 million next year and close to $100 million in fiscal year 2015.. The measures make changes to the income tax, capital gains tax, taxes on energy for manufacturing, and the grocery tax. A number of tax cut bills are directed to agriculture, the state's largest industry.
HB1585 makes changes to Arkansas’s income tax by lowering the top income tax bracket from $34,000 to $44,000. Currently, Arkansas’s top income tax rate is 7%. HB1585 lowers the top rate to 6.875%.
HB1966 reduces the capital gains tax. It includes a 70% exemption for gains between $5-$10 million and a 100% exemption for gains above $10 million. This bill also increases the standard tax deduction from $2,000 to $2,400 over a three year period.
HB1234 reduces the state sales tax on groceries from 1.5% to 0.125%. This would only take effect if budget obligations, such as the Pulaski County desegregation payments decline.
And HB1218 reduces the sales and use tax on natural gas and electricity used by manufacturers. This reduces the rate from 2.75% to .625 over a two year period. The legislature has continued to cut away at this tax, which was originally at 6% several years ago. This is done to make Arkansas more competitive with other states in order to recruit more industry, which in turn ultimately increases the tax revenue for the state.
Over $15 million of those cuts are directed to agriculture. These include an exemption on sales and use tax on utilities for certain agricultural structures such as poultry houses. This tax break alone is expected to save the industry over $10 million in taxes by fiscal year 2015. Tax breaks for a farmers also include a sales tax exemption for supplies for farm machinery and a tax break for utilities used for grain drying and storage facilities.