Arkansas Advocates for Children and Families (AACF), has published a whitepaper with progressive tax policy proposals for Arkansas. "A Tax and Budget Blueprint for a Better Arkansas" (Apr. 2016). The tax policy changes appear to be inspired by the Center on Budget and Policy Priorities. AACF recommends using the additional revenue primarily to fund education and social services. The proposed tax policy changes are unlikely in the current political environment, but they do provide a window into potential revenue raisers that the state could consider in the future, particularly with respect to the sales tax.
The whitepaper proposes a number of progressive changes to the Arkansas income tax. All seem unlikely in the present environment:
- Create an Arkansas earned income tax credit;
- Add a higher 7.5% individual income tax bracket on incomes in excess of $250,000;
- Eliminate the capital gains exclusion;
- Limit and cap itemized deductions;
- Require combined reporting by corporations; and
- Increase the corporate income tax rate by 1%.
For the sales tax, AACF proposed a number of changes to eliminate exemptions and expand the tax base. Some of these proposals do not seem as far-fetched, such as expanding the sales tax to online commerce and digital goods. (It would not be surprising if others are considering similar changes as revenue raisers for other purposes, including income tax relief.) AACF also proposes an increase in the gas tax, which has thus far been a nonstarter in the ongoing debate over highway funding.