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Arkansas Capital Gains Tax Cut

HB1002 has become a controversial proposal before the state’s legislature.  As reported by Talk Business, the sponsor of the bill — Rep. Ed Garner (R-Maumelle) — has cited “a UALR study” that shows the revenue impact of the proposed tax cut will be smaller than estimated by the Department of Finance and Administration.

The UALR report cited was written by yours truly.  Representative Garner approached me with a request to take a look at the numbers and see if I had any additional insights to provide.  I went through the numbers and came up with an alternative approach to estimating the revenue impact, using data from a simliar law that is on the books in Oklahoma.

In line with the mission of Arkansas Economist–providing information and analysis about the Arkansas economy–the report can be viewed here:  HB1002 (PDF).

Which set of estimates is correct?  Neither.  There is a great deal of uncertainty associated with forecasting the impact of hypothetical policy changes.  The estimates provided in my report should be viewed as an alternative that helps establish a plausible range of likely outcomes.  I neither endorse nor oppose HB1002, but provide this analysis in the public interest.