Arkansas’ top individual income tax rate recently fell from 6.6 percent to 5.9 percent. While that is great progress, Arkansas still has a long way to go if it wants to be competitive.
Eight states – including Arkansas’ neighbors Tennessee and Texas – do not tax individual income of any kind. New Hampshire does not tax wage income, and is likely to become a true no income tax state very soon. Twenty-one more states – including neighbors Illinois, Kansas, Kentucky, Mississippi, Missouri, and Oklahoma – have top rates that are lower than Arkansas’.
As more and more people and jobs move to no income tax states, more and more states are looking to phase out their income taxes.
“Now more than ever, states are competing–for jobs, new movers, skilled workers, and quality of life,” explained Lt. Gov. Tim Griffin in the Arkansas Democrat Gazette. “Arkansas needs bold ideas if we are to make our state the best possible place to live, work, and raise a family. That’s why I’m calling for a complete phase-out of Arkansas’ income tax, not immediately, but in the coming years. And we need to do it without raising other taxes in exchange.”
Lt. Gov. Griffin would like to eliminate the state income tax without raising other taxes in order to provide actual tax relief.
“Why would I give a taxpayer $1,000 in income tax savings and pay for it by charging them $1,000,” wrote Lt. Gov. Griffin. “That would be pointless. The goal is not simply to lower the income tax but lower the overall tax burden–the total amount of money the government takes. And raising a tax to cut a tax assumes that all the money state government spends is spent wisely with no room for improvement. We all know that’s not true.”
To accomplish this goal of phasing out the income tax and providing tax relief, Lt. Gov. Griffin is calling for efficient spending and the use of revenue triggers – a responsible way for states to provide tax relief without getting ahead of their skis.
“Tax triggers are an important tool that other states, such as North Carolina, have used to reduce taxes, and they can be helpful here,” explained Lt. Gov. Griffin. “A tax reduction trigger is a provision of law that automatically reduces a tax rate when government revenue exceeds a set amount. This ensures that as our economy grows, the benefits of that growth are returned to the taxpayers.”
Phasing out the state income tax would be a huge win for all Arkansans. It would allow individuals and families to keep more of their hard-earned money. It would allow small businesses, which file their taxes under the individual code, to invest more money in jobs and higher wages. And it would attract businesses looking to expand and investors looking for growing economies, bringing new jobs and opportunities to Arkansas.
To read Lt. Gov. Griffin’s full OpEd, click here. “Phase out state income tax” by Lt. Governor Tim Griffin