Senate panel approves bill to bar Arkansas cities and counties from levying income taxes

Senator Payton presented House Bill 10-26 to the Senate Revenue & Tax Committee, saying the bill would remove statutory provisions that allow cities and counties in Arkansas to impose an income tax. "Income taxes are one of the most economically damaging of all taxes because they penalize work and income," the sponsor said while arguing the bill is "an ounce of prevention" because state-level income-tax reductions and proposals to phase out the state income tax could prompt localities to backfill with local levies.

Committee staff told members a fiscal-impact statement for HB 10-26 was available in the packet and that the bill was expected to have zero revenue impact at the state level. Members asked whether the Municipal League or other stakeholders had taken a position; the sponsor said she saw no opposition in the House committee and was not aware of formal opposition.

No public testimony was offered. A motion to approve the bill was made and seconded, and the committee passed HB 10-26 by voice vote. The committee recorded the outcome as passed and will move the bill forward in the legislative process.

Why it matters: If enacted, HB 10-26 would preempt local governments from imposing income taxes, removing a statutory option that exists under current Arkansas law. Sponsors framed the bill as a preventive measure tied to broader state tax policy changes and called it a way to avoid local backfilling if the state income tax is reduced or phased out.