Republican gubernatorial candidate Curtis Coleman released a plan Wednesday (March 26) that would cut income taxes for two groups of Arkansas taxpayers, while also creating so-called "tax-free enterprise zones" across the state.
As part of Coleman's plan, the longtime businessman proposed eliminating a variety of taxes, including corporate taxes on what he calls "Arkansas''Mom and Pop' business, small businesses with net taxable income of less than $1 million."
The plan includes a proposal to exempt military retiree pay from state income taxes, which Coleman said was "simply the right thing to do."
The enterprise zones would be created in counties with median household income of less than $40,100 and would allow a new business entering a designated county to operate with no corporate tax payments during its first 10 years of operations, so long as the new business was not in competition with established businesses operating within the county.
The plan also proposes dropping income tax rates in the state by up to 20% over the next eight years, eventually dropping the top tax rate for workers earning more than $50,000 to only 5.53%, while those earning between $20,000 and $49,999 would pay 4.66%. Individuals bringing in between $10,000 and $19,999 would pay 3.19%, those making $4,100 to $9,999 would pay 1.18% and those earning below $4,100 would not pay income tax.
The state's top income tax bracket is now 7% and starts with annual wages of $34,000.
The Coleman campaign did not disclose how much the proposed tax cuts would cost the state of Arkansas, though the plan included a proposed goal to reduce the cost of state government per employee by not less than 20%.
In a press release, the founding CEO and president of North Little Rock-based Safe Foods Corporation said he was confident the plan could be successful.
"Arkansas has the capacities and resources to be one of the most prosperous states in the country. The adjustments we need to make are not radical or extreme. My proposals just give us an opportunity to successfully compete with other states for better paying jobs and more opportunities to be the successful people we can be."
HUTCHINSON’S TAX CUT PLAN
Coleman's tax plan is the latest to be released during the 2014 race to replace term-limited Democratic Gov. Mike Beebe.
A plan proposed by former U.S. Rep. Asa Hutchinson, Coleman's opponent in the May 20 Republican primary, would reduce the income tax rate from 7% to 6% for those earning between $34,000 to $75,000 a year, and from 6% to 5% for those earning between $20,400 to $33,999 annually.
Hutchinson's tax cut proposal would cost in the range of $100 million, with the former congressman adding that the state finished last year's fiscal year with a $299.5 million surplus.
“My number one priority as Governor will be job creation,” he said. “One way to spur job growth is through tax reduction and I am committed to providing across the board relief to all Arkansans.”
ROSS’ TAX CUT PLAN
Former Democratic U.S. Rep. Mike Ross' tax cut plan is substantially larger than Hutchinson's, with a price tag in the neighborhood of $574.5 million, according to the Arkansas Department of Finance and Administration.
A Talk Business report said the crux of Ross’ plan would be to retroactively index Arkansas income tax brackets taking a 1997 state law and applying it to the 1971 realignment of the tax code. Act 328 of 1997 tied state income tax brackets to inflation on a forward-going basis.
The proposal also includes reductions of one-tenth of a percent to the personal income tax rates passed under Act 1459 of 2013. When fully implemented, Ross’ plan would achieve the following:
• Wage earners making less than $9,000 would pay at a 0.9% tax rate;
• Those making $9,000 to $17,999 would pay at a 2.4% tax rate;
• For workers earning $18,000 to $26,999, they would pay at a 3.4% tax rate;
• $27,000 to $44,999 would pay a 4.4% tax rate;
• $45,000 to $75,099 would pay a 5.9% tax rate; and
• Those making $75,100 or more would pay at a 6.9% tax rate.
“I want to modernize our income tax code in a way that means lower, fairer taxes for working families and small businesses in Arkansas, and I want to do so in a fiscally responsible way that maintains our balanced budget and protects vital state services like education, Medicaid and public safety,” Ross said. “Just like Governor Beebe did with the sales tax on groceries, I will also gradually phase in my tax cut plan as the state can afford to do so.”
Ross' Democratic opponent, Dr. Lynette Bryant, has so far been silent on a tax cut proposal since announcing her candidacy.