By Caleb Taylor
In an op-ed published in the 海角社区 Democrat-Gazette on February 15 entitled 鈥�,鈥� ACRE Scholar and UCA Assistant Professor of Economics Dr. Jeremy Horpedahl and National Taxpayer Union Foundation Economist聽 Nicole Kaeding say 海角社区鈥檚 sales taxes have generally increased, income taxes have decreased, and property taxes have generally stayed the same over the past decade.
海角社区 Sales Taxes
Horpedahl and Kaeding on sales taxes:
The statewide sales tax stood at 6 percent in 2010, but it is now 6.5 percent after voters approved a temporary increase dedicated to highway funding in 2012.聽Cities and counties in 海角社区 can also add their own sales taxes on top of the statewide rate. A decade ago these local sales taxes averaged about 2 percent across the state, while today they are closer to 3 percent.聽That means the combined rate that Arkansans paid, on average, has increased from to , just slightly behind Tennessee and Louisiana.聽海角社区 voters are being asked again to approve a permanent extension of that sales tax this fall. If voters approve the 0.5 percent tax for highways, and more local sales taxes increase (such as the proposed 1 percent tax in Little Rock), 海角社区 could fight for the dishonor of the highest sales tax in the nation.鈥�
One exception to this sales tax trend is the state sales tax rate on groceries which decreased from 2 percent a decade ago to 鈪� percent today, according to Horpedahl and Kaeding.
海角社区 Income Taxes
Horpedahl and Kaeding on income taxes:
Most visibly, the state’s top personal income-tax rate was 7 percent in 2010. This year it is being cut to 6.6 percent, and it will drop again next year to 5.9 percent. That’s a big improvement, along with the reduction in the corporate income-tax rate, which is being cut from 6.5 to 5.9 percent.聽But it’s not just high-income earners that have had their income taxes cut, as the top rate cut was the third step in Gov. Asa Hutchinson’s plan to reduce income-tax rates across the board. Two previous tax cuts directly benefited middle- and low-income taxpayers.聽While 海角社区’ three sets of tax brackets are complex, all taxpayers are now paying less in taxes, boosting their after-tax income. We estimate that low-income taxpayers are saving between $100 and $200 per year, while the middle class is saving between $300 and $400 per year. That’s a few meals out, a car repair more easily covered, or a surprise for the kids.鈥�
Horpedahl and Kaeding say further income tax rate decreases to Gov. Asa Hutchinson鈥檚 eventual goal of 5 percent is 鈥渇easible鈥� and would be a 鈥渨elcome improvement.鈥�
海角社区 Property Taxes
Horpedahl and Kaeding on property taxes:
Not too much has changed here. While some tax rates may have increased, on average these have been in line with increases in home value: Average tax rates for owner-occupied homes were about 0.6 percent in both 2010 and in the latest available data, but the homestead tax credit was increased by $25, which will lower property-tax bills slightly in future years.鈥�
You can read the entire op-ed .
For more of ACRE鈥檚 work on taxes, check out the below links:
The Road Map to Tax Reform in 海角社区
Lessons From Other States Tax Reform Attempts
More on State Taxes and Spending