Property taxes to be reduced

LITTLE ROCK – During the 2023 regular session, the Arkansas legislature not only continued to lower state income taxes, but also reduced homeowners’ property taxes.

Act 315 lowers property taxes by increasing the homestead property tax credit from $375 to $425 a year. It is effective beginning with assessment year 2023.

In 2024 the act will save Arkansas homeowners an estimated $34 million, and in the following year savings will increase to $34.8 million. Homeowners that receive the homestead property tax credit will get a credit of $425 to offset their property tax liability.

The major tax reduction of the 2023 legislative session was Senate Bill 549, to reduce individual income taxes by $100 million a year and corporate income taxes by $24 million a year.

The legislature also approved HB 1045 to phase in a new method of calculating the income tax owed by companies that do business in multiple states. Tax savings will begin modestly because it is being phased in. Businesses in Arkansas will save $10.6 million next year.

Those savings go up dramatically and by 2030 will be more than $74 million a year. Sponsors of HB 1045 say it will make Arkansas more competitive when we recruit new industries.

The legislature has enacted tax cuts in every session since 2015, when lawmakers approved Act 22. It lowered income taxes by $102 million a year, mainly for middle-income families. In 2017, the legislature lowered income taxes for low-income families by $50 million a year and for retired veterans by $13.4 million a year.

In 2019, the legislature lowered individual income taxes for upper income and middle income families, saving them $97 million a year. The homestead property tax credit was increased, too.

In 2021, the legislature passed historic income tax cuts that save Arkansas families and businesses $500 million a year. The package will benefit taxpayers in all brackets. In 2022, legislators accelerated the 2021 tax cuts.

Since 2015, the legislature has lowered the personal income tax rate from 7% to 4.7%. Over the same period legislators have lowered the corporate income tax rate from 6.5% to 5.1%.

The tax reductions were made possible because the legislature consistently budgeted very conservatively. Even with the tax reductions, state government has accumulated a surplus of more than $1.6 billion.

The state general revenue budget, which pays for dayto-day operations, will be about $6.2 billion for the fiscal year that begins July 1.

The availability of reserve funds will make it possible for the state to build prison space for an additional 3,000 inmates, which reinforces the criminal justice bill that was approved late in the session.