Icon (Close Menu)

Logout

Legislative Session Meets Chamber Priorities

5 min read

As we move into the second half of the year, the Arkansas State Chamber of Commerce/Associated Industries of Arkansas continues to advance our state by strengthening the voice of the business community in every region and, ultimately, driving forward the shared goal of economic prosperity for all.

There’s no denying it: Arkansas is becoming more economically competitive every day. According to the American Legislative Exchange Council, Arkansas is the 15th most economically competitive state in the U.S. The Bureau of Economic Analysis also shows that Arkansas’ economic growth is outpacing most of the nation as the state with the ninth-fastest growing gross domestic product.

Arkansas’ economy is booming, in large part, because of the steady improvement of the state’s business climate, giving more businesses more opportunities to succeed. For decades, the State Chamber/AIA has advocated to protect and improve Arkansas’ business climate by prioritizing issues like tax rates, unemployment insurance rates, workers’ compensation rates and more. In the last 10 years, Arkansas has made huge strides in each of these areas.

This year, the American Legislative Exchange Council ranked Arkansas fourth best in the nation for recently legislated tax changes. These changes are projected to result in hundreds of millions of dollars in annual cost savings for taxpayers, underscoring our state’s dedication to promoting a thriving economy that benefits employers and employees alike.

Employers have also seen significant reductions in expenses, such as unemployment insurance and workers’ compensation. According to data from the U.S. Department of Labor, Arkansas employers’ average unemployment insurance costs have decreased by a staggering 84% since 2012. Plus, data from the National Foundation for Unemployment Compensation & Workers’ Compensation shows that Arkansas employers pay $220 less in workers’ compensation costs per covered employer than the national average, meaning that Arkansas has the third lowest workers’ compensation costs in the nation.

These improvements are the result of strategic legislative reforms made possible by the collective efforts of business and industry leaders, community leaders and elected officials. The improvement of Arkansas’ business climate directly correlates with the state’s economic growth.

This is why policy matters, and it is why the State Chamber/AIA remains committed to monitoring legislation that influences business and industry. We invite you to read our summary below that outlines some of the 94th General Assembly’s most significant legislative activity that will impact business and industry in Arkansas.

TAXES

  • During the regular session of the 94th General Assembly, legislators passed more than $186 million in tax cuts, including a reduction in both the corporate income tax rate (to 5.1% from 5.3%) and the upper individual income tax rate (to 4.7% from 4.9%). Individual state income taxes were reduced by $100 million a year, and corporate income taxes were reduced by $24 million a year.
  • Lawmakers further cut state income taxes during the First Extraordinary Session of the 94th General Assembly. Gov. Sarah Huckabee Sanders signed a bill that lowers the top individual and corporate income tax rates by three-tenths and made other adjustments to the income tax rate tables, which were effective Jan. 1, 2024. The top individual rate became 4.4% and the top corporate rate became 4.8% for the 2024 tax year. The act also provides a $150 income tax credit to individuals making $89,600 or less and reduced amounts for income up to $103,601.
  • One of the State Chamber/AIA’s top priorities for the 94th General Assembly was to repeal the outdated Throwback Rule that has long put our state at a competitive disadvantage. The rule allows a state where the sale of tangible property originates to tax the income from those sales if the destination is the federal government or another state that lacks jurisdiction to levy a tax. Act 485 will phase out the rule over the next seven years. Other states have also eliminated this policy, because it results in an often high and uncompetitive rate of taxation on some businesses. The measure reduced taxes by $10.6 million in fiscal 2024 and will reduce taxes by $74 million once fully implemented.

UNEMPLOYMENT INSURANCE

  • Act 196 makes various changes to the state’s unemployment insurance laws. First, the measure will reduce employer unemployment taxes by an estimated $31 million. It also prevents an increase in the unemployment insurance wage base if the Unemployment Insurance Trust Fund has a balance of at least $600 million. (The fund’s current balance is over $900 million.) The act also reduces the maximum number of benefit weeks to 12 from 16 weeks; lowers the new employer UI tax rate to 1.9% from 2.9%; reduces the maximum UI tax rate to 10% from 14%; and repeals the Stabilization Tax, which included a dedicated 0.2% for administration.
  • Act 106 states that failing to accept suitable work within five business days or missing two scheduled job interviews without notice disqualifies an individual from receiving unemployment benefits.
  • Act 587 mandates that individuals must make a minimum of five work search contacts per week to qualify for weekly unemployment benefits.

EDUCATION

  • Arguably the most highly anticipated measure of the 94th General Assembly, the Arkansas LEARNS Act has been called the largest education overhaul in state history. Among other reforms, the measure establishes the Education Freedom Accounts and allocates 90% of a student’s state per-pupil funding to allow the student to attend private school or home school (about $7,618 per student, under the 2023-24 funding formula). The law also increases starting teacher salaries to $50,000 from $36,000, giving those already above the minimum a $2,000 raise. The measure costs an estimated $297.5 million last year, with an increase to approximately $343.3 million this year, as more students became eligible for the accounts.
  • The 94th General Assembly voted to refer one proposed constitutional amendment to voters on Nov. 5, 2024. If passed, the Arkansas Lottery Proceed Funding for Vocational-Technical School Scholarships and Grants Amendment will allow lottery proceeds to fund scholarships for vocational/technical schools. Currently, lottery scholarship funding is restricted to use at two and four-year colleges.

UTILITIES

  • Act 278 reduces the current 1-to-1 compensation solar users receive for energy produced and returned to the grid. The measure includes an amendment to “grandfather” in current solar panel users, allowing solar users to take advantage of net metering at the current 1-to-1 rate structure through 2040.

PUBLIC SAFETY

  • Act 659, also known as the Protect Arkansas Act, will require those convicted of serious crimes to serve most — if not all — of their prison sentences. The measure also includes funding to help formerly incarcerated individuals enter the workforce and suspends court fines and fees for 120 days after an individual is released from custody. The state estimates the additional inmate care will cost around $163.8 over the next 10 years. Lawmakers also set aside $330 million in surplus funding to build 3,000 new prison beds.

STATE BUDGET

  • During the Fiscal Session of the 94th General Assembly, lawmakers passed the Revenue Stabilization Act, detailing the state’s expenditures for fiscal 2024-25. The act includes a $109.3 million increase, equivalent to a 1.76% rise in state spending, as proposed by Gov. Sanders. This increase brings the total state general budget for the upcoming fiscal year to $6.31 billion, with significant boosts allocated to Educational Freedom Accounts, the Public School Fund and Arkansas State Police.
Send this to a friend