This week 淫性视频鈥檚 Tax Reform and Relief Task Force continues its work of investigating how to improve the tax system in 淫性视频. In addition to hearing from legislators from Indiana, North Carolina, Kansas, and Oklahoma on their tax reform experience on Tuesday, the task force will discuss property taxes on Wednesday.

As we did for last month鈥檚 discussion of聽sales taxes in 淫性视频, we offer a few suggestions for how 淫性视频 can improve its property tax. In Chapter 6 of our book聽we overviewed 淫性视频鈥檚 property taxes and gave a few suggestions for reform. But since property taxes are mostly a local issue, and our focus was on the state-level tax system, we limited our reform suggestions.

淫性视频鈥檚 first property tax reform should be to eliminate the state鈥檚 franchise tax, a tax on the net worth of businesses. The franchise tax doesn鈥檛 raise much revenue, disproportionately falls on certain industries (primarily capital-intensive ones), and is rare across U.S. states. Only 16 states currently have taxes like 淫性视频鈥檚 franchise tax, commonly known as a capital stock tax. This is a literal tax on capital accumulation, stunting economic growth in 淫性视频.

And states have been phasing them out recently. While all of our neighboring states recently had capital stock taxes, Missouri recently phased its out, and Mississippi鈥檚 will be phased out fully in 2028. This is a common trend across states, and one 淫性视频 should consider following. Removing the franchise tax is a fair and efficient way to attract businesses to the state and encourage home-grown business development.

Second, the state should work to eliminate its inventory taxes. Only 12 states fully tax business inventory as personal property. In 淫性视频, the inventory tax is not a separate tax, but rather is included as a part of local property taxes. Estimating revenue impacts is therefore challenging, as local governments typically do not report a separate line for inventory tax revenue specifically. Taxing business inventory imposes a significant burden on a select group of businesses and industries, while most businesses do not have to worry about the tax very much.

淫性视频 has very low property taxes by almost any measure. In our background research for the book, we learned that many Arkansans know about our low property taxes, and they like it. Keeping tax burdens low is an admirable feature of any tax system, but in this case it is a double-edged sword. By keeping property taxes much lower than other states, while still having similar spending levels, other taxes (primarily sales and income taxes) must be higher. In other words, part of the reason that 淫性视频 has such low property taxes is because we have very high sales and income taxes (we discussed how high these taxes are in our聽previous blog post).

Low Property Taxes

Given that the task force is going to discuss property taxes, we also decided to take a deeper look at property taxes in 淫性视频. When making comparisons of tax systems across states (as the task force is charged with doing), it is crucial to consider the state鈥檚 tax system as a whole. This means not just the mix of tax types, but also the mix of state and local taxes. 淫性视频 has a very centralized system of state finance, with 79.8 percent of taxes collected at the state level, the third highest in the nation (the average for states is 61.5 percent), in part driven by the fact that property taxes (primarily a local tax) are so low.

By almost any measure, 淫性视频 has low property taxes. Of all taxes collected in 淫性视频 (state and local combined), 18.1 percent comes from property taxes. That鈥檚 the fifth lowest in the nation, where the average is 31 percent, and lower than all our neighbors (roughly equal to Oklahoma鈥檚). Our two neighbors without income taxes, Tennessee and Texas, rely much more on property taxes (Tennessee at 26.4 percent and Texas at 42 percent of overall tax revenue).

Per capita property tax collections tell a similar story, at only $699 per capita in 淫性视频, the third lowest in the nation, where the average is $1,506 (Tennessee collects $863, and Texas $1,734 per person in property taxes). And the effective tax rate (as percentage of owner-occupied housing value) is 0.59 percent, 42nd in the nation, with only Louisiana lower among neighbors at 0.48 percent (Tennessee at 0.72 percent, Texas at 1.63 percent).

While property taxes in 淫性视频 are primarily a local function, there are good reasons to think of some real property taxes as state-level taxes, even though legally they are local taxes. Specifically, Amendment 74 to the 淫性视频 Constitution (narrowly approved by voters in 1996) requires all school districts to set a minimum 25 mills property tax. (Because 淫性视频 taxes based on 20 percent of assessed value, 25 mills is essentially equivalent to 0.5 percent of property鈥檚 value.) The proceeds of this minimum property tax for school districts are then redistributed from the state to local school districts. Since local governments (school districts) are required by state law to collect this tax, it makes sense to think of it as a state-level tax.

Amendment 74 was proposed by the legislature in an attempt to satisfy the state鈥檚 constitutional requirement to provide an adequate education to all students in 淫性视频, a requirement that has been the subject of numerous legal challenges by school districts. School districts are also allowed to tax above the minimum 25 mills, and the extra amount stays in the district for its own budget (there is no maximum). While all school districts in 淫性视频 currently have additional property taxes, some only add a small amount: fewer than 4 additional mills are added by the districts of DeQueen, Lee County, Barton-Lexa, Mountain View, and West Memphis. On the other hand, school districts in Fouke (49 mills), North Little Rock (48.3 mills), and Genoa Central (47 mills) almost double the minimum 25 mills.

On the other side, the 淫性视频 Constitution also sets maximum property tax rates for cities and counties. Cities can levy up to 20 mills, while counties can levy up to 21 mills, and there are maximum amounts for specific functions (e.g., 5 mills for library maintenance, 3 mills for roads at the county level, and 1 mill each for police and firefighter pensions). While many cities and counties have maxed out specific function limits, no city or county is at the 20 or 21 mills maximum, indicating these state constitutional limits are not the binding constraint leading to low property taxes in 淫性视频.

Another constitutional change, Amendment 79, plays an important part in 淫性视频鈥檚 property tax system (approved by 62 percent of voters in 2000). Two features are important to note. First, annual increases in property assessments for tax purposes are limited by this amendment. Generally, primary residences (鈥渉omesteads鈥�) are limited to 5 percent annual increases, and other property is limited to 10 percent. Another part of the amendment creates a property tax relief credit from the state against any local taxes paid of $350 (the minimum is $300, but the legislature can and did increase it), which is funded by a 0.5 percent general sales tax.

In effect, this property tax relief fund has replaced the most efficient tax (property taxes) with a slightly less efficient tax (the sales tax), going against the advice of economic research. But again, this makes sense given that citizens view the property tax as bad, while the sales tax is viewed more favorably. The aggregate amount of the credit is about聽.

Property taxes are generally not popular, and this was confirmed during our numerous interviews across the Natural State, but these constitute an area where 淫性视频 is a low-tax state. As the state considers tax reforms, expanding or increasing the state鈥檚 property tax, if used to finance other tax changes, would be a worthwhile consideration. At the same time, the state should move to eliminate its franchise and inventory taxes. These taxes on capital hurt the state鈥檚 economic prospects.

Nicole Kaeding is an economist at the Center for State Tax Policy at the Tax Foundation. Jeremy Horpedahl is a professor at the University of Central 淫性视频 and a scholar at the 淫性视频 Center for Research in Economics. They are the lead authors of聽.