Prioritizing Tax Reform in Arkansas

Yesterday, the Arkansas Tax Reform and Relief task force took a big step forward: It approved its recommendations on how to restructure the state’s tax code.

The full report includes 22 specific recommendations, with the overwhelming majority coming from the various Tax Foundation resources provided to the task force over the last year.

Among the recommendations, the task force suggested:

• Consolidating and lowering individual income tax rates
• Lowering the corporate income tax rate
• Repeal the state’s throwback rule and moving to single sales factor
• Expanding net operating losses
• Repealing several sales tax exemptions
• Clarifying the taxation of remote sellers
• Establishing a regular review process for tax expenditures

In total, the Department of Finance and Administration estimates that these reforms will cost approximately $400 million in tax cuts, with approximately $50 million in identified revenue increases. The task force has previously stated its goal was a net cut of $200 million, so now, the task force will spend the next several months trying to prioritize its recommendations and prepare the necessary legislative text for the upcoming legislative session.

The task force once again asked me to present my thoughts on the best paths forward. In my testimony, I outlined three options for prioritizing the various recommendations. My full presentation is available below.

While the work continues in Arkansas, yesterday’s vote was a large leap forward in creating a pro-growth tax system for Arkansas.