Great states are full of strong families and thriving communities. We all want to live in a place where kids can have the opportunities they need to reach their full potential, regardless of their zip code, race or income. But we can’t just hope for things to turn out the way we want; we have to put in some effort and investment. If we look at key measurements of child well-being in Arkansas, it’s fair to say Arkansas needs to make critical investments to improve outcomes for kids.
Taxes are one way we come together to lay the foundations of opportunity. They help pay for good schools for our kids and the roads we all drive on. They help pay for the kinds of public services that help families make ends meet, help workers get to work, and help businesses recruit and retain talent. All of us chip in. The income tax is the fairest way to raise revenue because it’s the only tax that asks the wealthiest among us to pay more than everyday Arkansans.
There’s been a lot of talk lately about cutting or eliminating the income tax in Arkansas. But proposals to cut the top income tax rate, like SB549, simply don’t help most Arkansans in any substantial way. A decade of cuts to the personal income tax have benefited the wealthiest Arkansans with tens of thousands of dollars annually, while most Arkansans hardly got anything.
Further cutting our top tax rate from 4.9% to 4.7% would cost $115 million annually – about as much as the cost of universal 8-week paid parental leave for all mothers and fathers in Arkansas. According to an analysis by the Institute on Taxation and Economic Policy (ITEP), 80% of the benefits of the proposal – $92 million of the $115 million – would flow to Arkansans in the top 20% of earners in our state.
The proposal to cut the top corporate income tax rate would be even more skewed toward the wealthy. Corporate income tax cuts are passed onto wealthy shareholders, many of whom don’t even live in our state – for example, ITEP estimates that 80% of the benefits would leave our state entirely.
As for the rest of us, we’re already left holding the tab to pay more than our fair share of taxes so our state can still pay for teachers, roads and other investments that keep our state running. Most Arkansans pay more in sales taxes than income taxes at the state and local level. Not surprising, as we consistently rank near the top of sales tax burdened states. Major cuts to the top income tax rate would only make this worse.
In fact, because of continued cuts to the top tax rate, Arkansas is scheduled to raise less money from personal income taxes than sales taxes
We know sales taxes fall more heavily on lower- and moderate-income Arkansans. Further cuts to the top income tax rate will make this worse as the burden of funding basic state services is shifted to those who can least afford it in the form of sales taxes, excise taxes and other fees and away from the personal and corporate income tax.
We can forge a better path toward shared prosperity in our state. We should make investments that help unlock the potential of all people in our state. High quality learning opportunities for all children in Arkansas would pay off in their long-term economic outcomes down the road. State investments in childcare opportunities can improve affordability and quality and pay big dividends for both parents and businesses that are losing workers due to a lack of childcare access. We could ensure longer health care access to more new mothers and address our worst-in-the-nation maternal mortality rates. Arkansans deserve it.