The Arkansas General Assembly will likely consider one or more proposals to eliminate or reduce state taxes on capital gains during the 2011 legislative session. While the Arkansas state budget situation is not as bad as that of some states, it’s clear that state general revenue will be tight during the next two years. Proposals to cut taxes on capital gains will have to be carefully examined in light of the potential impact they could have on the state budget. Three issues will be central to this debate:
1. What is the impact on state general revenue?
2. What is the potential impact on the balance of the Arkansas tax system among working families at different income levels?
3. What is the impact on state economic development?