Reforming Arkansas’s Income Taxes
April 26, 2018
Today, I presented to Arkansas’s Tax Reform and Relief Task Force on reforms to the state’s individual and corporate income tax structure.
Arkansas’s individual tax code is unique. The state uses a progressive income tax structure, like most states, but the rate schedules also vary by income. An individual with income between $21,000 and $75,000 uses a different rate schedule than those with incomes above or below those amounts. No other states adopt a similar structure.
Arkansas’s top rates both for individual and corporate income are also uncompetitive, both regionally and nationally. Two bordering states, Tennessee and Texas, have no individual income tax. Its top corporate income tax rate of 6.5 percent is also high.
Additionally, there are a number of issues with the base of each tax, especially the corporate income tax. The state has a throwback rule, which seeks to capture “nowhere income,” and restrictive net operating loss carryforwards.
As noted in the testimony and in our book Arkansas: The Road Map to Tax Reform, the state should use the revenue generated by repealing sales tax exemptions to lower these taxes.
Was this page helpful to you?
The Tax Foundation works hard to provide insightful tax policy analysis. Our work depends on support from members of the public like you. Would you consider contributing to our work?Contribute to the Tax Foundation
Let us know how we can better serve you!
We work hard to make our analysis as useful as possible. Would you consider telling us more about how we can do better?Give Us Feedback