LITTLE ROCK – State Representative John Maddox is proud to announce that the new year will bring a welcome tax break to working Arkansans. The tax cut is thanks to a historic bill passed by the state legislature earlier this year.
The bill in question was written and sponsored by Representative Maddox. This new law is the fulfillment of one of campaign goals from his initial legislative candidacy. Maddox stated in a phone interview that when he was considering running for office one of the most common concerns he heard was that of state tax rates.
Maddox explained that he had worked for months to find a consensus among his peers so they could get a tax cut passed. He is proud of the fact that the bill incentivizes work while providing tax cuts to individuals and small businesses.
The need for the tax cut was clear to Maddox. Arkansas tax rates are among the highest in the region with some neighboring states functioning without state taxes.
Maddox does admit that while he wanted to provide a tax relief for working Arkansans, he wanted to make sure a tax cut didn’t hurt the state’s ability to provide necessary services to state residents.
“I spent hours working with economists to make sure we can afford this.” Maddox stated.
The approved tax cuts should not hinder the state’s ability to fund essential government services. The new tax rates were cut as far as the state could while remaining fiscally responsible.
The acts change the name of the long-term reserve fund to the catastrophic reserve fund. The tax cuts are contingent upon no transfers being made out of the catastrophic reserve fund.
The tax cut will take place in annual increments, bringing the state tax rate from seven percent to 4.9 percent.
The top rate will drop from 5.9 percent to 5.5 percent January 2022. It will drop to 5.3 percent in 2023, 5.1 percent in 2024 and finally to 4.9 percent in 2025.
This piece of legislation will provide the largest state income tax reduction in state history. Once fully implemented, this will provide nearly $500 million in tax relief to Arkansans.
The legislation also combines the low and middle income tax tables and indexes the standard deduction to the Consumer Price Index. It provides a $60 non-refundable tax credit for individuals with an income of less than $24,700. It’s estimated that 104,881 low-income Arkansans will have their state income tax liability eliminated.
Maddox’s bill passed by an 82-16 vote in the House. An identical Senate bill passed in the Senate by a vote of 30-4. Both bills had the full support of House and Senate Republicans with a handful of Democrats and an Independent voting for the bill.