(April 2013) The state legislature has reduced the top Arkansas income tax rate from 7.0 to 6.9 percent on net income greater than $44,000 for “tax years beginning on or after January 1, 2015.”  The measure1 also cuts income taxes for lower-income Arkansans beginning in January 2014.2

 

No Change in Arkansas Rank

 

The new 6.9 percent rate will remain the highest among states adjacent to Arkansas, and the third-highest in the Southeast region3 as the following chart shows:

 

North Carolina          7.75%
South Carolina          7.00%
Arkansas          6.90%
West Virginia          6.50%
Georgia, Kentucky          6.00%
Louisiana, Missouri         
Virginia          5.75%
Oklahoma          5.25%
Alabama, Mississippi          5.00%
Tennessee          6.00% on dividends and interest income only
Florida, Texas          No State Income Tax

 

No Dynamic Analysis

 

DFA estimates a $28.6 million loss (FY 2014) and $57.2 million loss (FY 2015) to the state of Arkansas.  DFA did not prepare separate static and dynamic revenue estimates in analyzing the measure. 

 

–Greg Kaza

1  PA 1459 of 2013 sponsored by state Rep. Charlie Collins, R-Fayetteville.

2 The measure “expands the current 6% income tax bracket by $10,000 to impose that 6% rate on taxable income from $20,400 to $43,999,” according to a one-page legislative impact statement (March 13) prepared by the state Department of Finance and Administration. “Currently, the 6% bracket applies to income of $20,400 to $33,999.”  The measure also “incorporates the current individual income tax brackets for the 1%, 2.5%, 3.5% and 4.5% tax rates, as indexed for inflation, into state law.”

3 Federation of State Tax Administrators, http://www.taxadmin.org/fta/rate/ind_inc.pdf