The Tax Reform and Relief Act of 2017 lowers the income tax rate for Arkansans making below $21,000 a year. It impacts 650,000 Arkansans. It also creates a task force to explore future tax reform. The task force is required to complete a report by September 1, 2018. The report will include proposals for tax cuts and job growth.
The Governor also signed legislation creating an income tax exemption for retired military members and legislation aimed at changing the way we fund higher education.
Act 141 creates a state income tax exemption for retirement benefits received by a member of the uniformed services or benefits paid to their survivors. This bill also taxes unemployment benefits and specified digital products, such as books and ringtones. It ensures candy and soft drinks are subject to the full state sales tax rate, where currently they are charged the same reduced rate as groceries. These increases are to offset the exemption for military retirement benefits.
The House has also passed two other tax-related. Act 49 makes clear that Arkansans have only one homestead property tax credit per year. And Act 48 requires that Arkansas corporate income tax returns be filed by April 15 beginning this year.
The House passed a budget that devotes nearly half of our revenue to education. It includes increases in spending for health care, foster care, and our criminal justice system.
The $5.49 billion budget includes an increase of $163 million (3.1%) in spending from the current fiscal year.
Of that increase, $112.8 million is directed to the Department of Human Services (DHS). Included in the DHS increase is $75 million directed to match federal Medicaid funding. It also includes a $26 million increase for foster care and $4.5 million is directed to fund the mental health crises stabilization centers which were created in the criminal justice reform measure passed earlier in the session.
In education, the budget directs a $3 million increase for Pre-K funding and $2.4 for computer science courses.
Other increases include funding for the Department of Correction and the Department of Community Correction.
We also passed HB1830 which specifies the distribution of surplus funds, also called the Rainy Day Fund.
The distribution includes:
- $90 million to Medicaid. ($70 million for Fiscal Year ‘18, $20 million for Fiscal Year ‘19)
- $10 million to the Department of Correction.
- $30 million to Arkansas Economic Development Commission for economic development incentives.
- $60 million for school facilities
- $20 million to help match federal highway grants.
The legislature has already spent $14 million in this fund to assist needs in foster care.