Arkansas‘s tax system ranks 36th overall on the 2025 State Tax Competitiveness Index. Arkansas ranks poorly on the Index despite multiple rounds of income tax rate reductions since 2015 and a resulting low top marginal individual income tax rate, due to a range of structural shortcomings in the state’s tax code. For instance, Arkansas only allows corporations’ net operating losses (NOLs) to be carried forward for 8 years, while most states either allow 20-year or uncapped carryforward periods. The state stands alone in having two different income tax rate schedules depending on taxpayer income.
Arkansas also has the third-highest combined state and local sales tax rate in the nation at 9.46 percent. The state also imposes a tax on capital stock, at 0.3 percent of the apportioned net worth of corporations. Such taxes are increasingly rare, and Arkansas’s tax rate is the highest in the nation. The state also assesses property tax on businesses’ inventory, making the state even more of an outlier. Both taxes are assessed whether the firm makes a profit or loss in a particular tax year, which is harmful to small businesses seeking to scale up their operations, capital-intensive firms, and all firms during an economic decline.
| Category | Rank | Rank Change | Score |
|---|---|---|---|
| Overall | 36 | -2 | 4.85 |
| Corporate Taxes | 15 | -4 | 5.50 |
| Individual Income Taxes | 39 | 0 | 4.66 |
| Sales Taxes | 44 | 0 | 3.89 |
| Property Taxes | 19 | -6 | 5.23 |
| Unemployment Insurance Taxes | 11 | -9 | 5.61 |
Get facts about taxes in your state and around the U.S.
Summer has arrived, and states are beginning to implement policy changes that were enacted during this year’s legislative session (or that have delayed effective dates or are being phased in over time).
28 min read
The vaping industry has grown rapidly in recent decades, becoming a well-established product category and a viable alternative to cigarettes for those trying to quit smoking. US states levy a variety of tax structures on vaping products.
7 min read
In the United States, taxes are the single most expensive ingredient in beer. The tax burden accounts for more of the final price of beer than labor and materials combined—the many different layers of applicable taxes combining to total as much as 40.8 percent of the retail price.
6 min read