The Arkansas legislature has started 2017 with tax legislation that will affect many Arkansans. These changes will impact everything from retirement benefits to audiobooks downloaded from the Internet. House Bills 1159 and 1162 are the two major bills that have been enacted so far.
House Bill 1159 will lower personal income tax rates for tax years beginning on or after January 1, 2019 for certain levels of income earned. Any individual, trust or estate having total income of less than $21,000 will be subject to a maximum tax rate of 3.4% which is down from 4.4%. For these individuals or entities, income under $4,200 will be exempt from income tax.
House Bill 1162 will exempt military retirement benefits from state income taxes, which will cut general revenue by $6.7 million when it takes effect in 2018. That number will jump to $13.4 million in 2019 while putting an average of $462 a year back into our military veteran’s pockets during retirement. Veterans will also no longer be able to claim the $6,000 retirement exclusion that is available under current state tax law for all taxpayers.
Another change presented in House Bill 1162 is an amendment to the Arkansas Gross Receipts Act of 1941 that will increase the sales tax on candy and soft drinks from 1.5% to 6.5%.
An additional change to the Arkansas Gross Receipts Act of 1941 is the inclusion of digital products, codes, or services sold, leased or rented. This amendment will allow for a sales tax to be charged directly to the consumer for the products downloaded. Digital products subject to this tax will include audiobooks, music downloads, and movies.
Income tax will also be levied on certain types of unemployment compensation. Unemployment compensation paid from federal unemployment trust funds and paid under Title IV of the Social Security Act will be taxable while an exclusion will remain for unemployment insurance benefits received from the Railroad Retirement Board.