This development follows the conclusion of a special legislative session, during which lawmakers also greenlit legislation to ensure the continuity of the state's hunting and fishing programs, according to Fox News.
The legislation, signed by Sanders, includes a reduction in the state's top corporate and individual income tax rates, along with an increase in the homestead property tax credit. This move comes on the heels of a series of income tax reductions that Arkansas has implemented over recent years. Since assuming office last year, Sanders, a Republican, has signed three such cuts into law and expressed her intention to gradually phase out the levy.
"We are moving in the right direction and we're doing so responsibly," Sanders stated at a news conference prior to the legislation's signing. The new measures will see the state's top individual tax rate drop from 4.4% to 3.9%, and the top corporate rate decrease from 4.8% to 4.3%, retroactively effective from January 1. State finance officials estimate that these cuts will result in a cost of approximately $483 million in the first year, followed by an annual cost of $322 million thereafter.
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Proponents of the tax reductions argue that Arkansas is financially well-positioned to implement these changes, citing a projected fiscal year-end surplus of $708 million. However, critics contend that the benefits disproportionately favor higher earners and advocate for increased funding towards reducing the state's high maternal mortality rate and enhancing services for individuals with disabilities.
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Democratic Representative Denise Garner voiced her concerns, stating, "Now is not the time to be underfunding the programs that deal with these problems." Despite such opposition, the tax cut legislation mandates the allocation of $290 million from the state's surplus into a reserve fund to safeguard against potential economic downturns.
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In addition to the income tax cuts, the legislation signed by Sanders raises the homestead tax credit from $425 to $500, retroactive to January 1, a move that will cost the state $46 million.
The tax cuts were initially slated for consideration later this year, but plans were expedited following the adjournment of the legislative session last month without a budget for the state Game and Fish Commission. This left the commission, responsible for issuing hunting and fishing licenses and overseeing wildlife conservation, in a state of uncertainty about its operations beyond July 1.
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To address this, Sanders signed a compromise budget proposal for the agency, which includes a lower maximum salary for the director and requires legislative approval for any pay increase exceeding 5%. This move not only ensures the continued operation of the agency but also reflects the conservative value of fiscal responsibility.
