The Tax Foundation

Research Areas

Arkansas

The Facts on Arkansas’ Tax Climate

Here are some basic facts on Arkansas’ tax system and how it compares to other states:

Tax Freedom Day Arrives on April 17 in Arkansas
Tax Freedom Day is the day when Americans finally have earned enough money to pay off their total tax bill for the year. In 2008, Arkansas taxpayers had to work until April 17 to pay their total tax bill (ranked 30th nationally), six days before national Tax Freedom Day (April 23). The Tax Freedom Days of neighboring states were: Texas, April 12 (ranked 40th nationally); Oklahoma, April 11 (ranked 43rd nationally); Missouri, April 14 (ranked 36th nationally); Tennessee, April 11 (ranked 44th nationally); Mississippi, April 7 (ranked 49th nationally); and Louisiana, April 13 (ranked 38th nationally).

Tax Freedom Day has been projected using the most up-to-date economic and budget projections from official government agencies. However, Tax Foundation estimates of average state and local tax rates for 2008 will not be released until later this spring as we await more up-to-date data from various government agencies.
Full study of Tax Freedom Day, nationwide and in each state

Arkansas' State and Local Tax Burden Above National Average in 2007
Estimated at 11.3% of income, Arkansas’ state-local tax burden percentage stands at 13th nationally, just above the national average of 11.0%. Arkansas taxpayers pay $3,514 per capita for state and local taxes, and per capita state income is $31,145.
Arkansas's State-Local Tax Burden, 1970-present

Arkansas’ 2008 Business Tax Climate Ranks 35th
Arkansas ranks 35th in the Tax Foundation's State Business Tax Climate Index. The Index compares the states in five areas of taxation that impact business: corporate taxes; individual income taxes; sales taxes; unemployment insurance taxes; and taxes on property, including residential and commercial property. The ranks of neighboring states were as follows: Texas (8th), Oklahoma (19th), Missouri (15th), Tennessee (16th), Mississippi (18th) and Louisiana (32nd).
50-State Comparison of Business Tax Climates (data only)
2008 State Business Tax Climate Index, Fifth Edition (full study)

Arkansas’ Individual Income Tax System
Arkansas' individual income tax system consists of six separate brackets with a top rate of 7% kicking in at an income level of $30,100. That top rate ranks 12th highest among states levying an individual income tax. In 2005 individual income tax collections were $676 per person, which ranked 31st highest nationally.
50-State Table of Individual Income Tax Rates
50-State Table of State Individual Income Tax Collections
50-State Table of State and Local Individual Income Tax Collections Per Capita

Arkansas’ Corporate Income Tax System
Arkansas' corporate tax structure consists of six separate brackets with a top rate of 6.5% kicking in at an income level of $100,000. Among states levying corporate income taxes, Arkansas' top rate ranks 30th highest nationally. In 2006, state-level corporate tax collections (excluding local taxes) reached $131.11 per capita, which ranked 32nd highest nationally.
50-State Table of Corporate Income Tax Rates, 2000-2008
50-State Table of State and Local Corporate Income Tax Collections Per Capita and Per Household, 2005
50-State Table of State Corporate Income Tax Collections Per Capita, 2006

Arkansas Levies Sales Tax above National Median
Arkansas levies a 6% general sales or use tax on consumers, above the national median of 5.4%. In 2005, combined state and local general sales tax collections were $1,557 per person, which ranked 8th highest nationally. Arkansas' gasoline tax stands at 21.8 cents per gallon (32nd highest nationally), while its cigarette tax stands at 59¢ per pack of twenty (ranked 37th nationally). The sales tax was adopted in 1935, the gasoline tax in 1921 and the cigarette tax in 1929.
50-State Table of Sales and Excise Tax Rates
50-State Table of State and Local General Sales and Gross Receipts Tax Collections Per Household and Per Capita, Fiscal Year 2005

Arkansas's Property Taxes: Localities Have the Nation's Lowest, but State Level Collections Unusually High
Arkansas's local governments collect less in property taxes than any other state's local governments. Local governments in Arkansas collected $580,614,000 during fiscal year 2004, the latest year for which the Census Bureau has released state-by-state data. However, Arkansas's state government collects almost as much as its local governments do, which is an unusual occurrence. In 2004, the state of Arkansas collected $520,324,000 in statewide property taxes. Arkansas's combined state and local property tax collection figure was $1,100,938,000 in FY 2004. That brought Arkansas' per capita property tax collection to $400 (ranked 49th nationally).
State property tax collections per capita by state

Federal Tax Burdens and Expenditures: Arkansas is a Beneficiary State
Arkansas taxpayers receive more in federal funding per dollar of federal taxes paid than the average state. Per dollar of Federal tax collected in 2005, Arkansas citizens received approximately $1.41 in the way of federal spending. This ranks the state 14th highest nationally and represents a rise from 1995 when Arkansas received $1.22 per dollar of taxes in federal spending (then ranked 16th nationally). Neighboring states and the amount of federal spending they received per dollar of federal taxes paid were: Texas ($0.94), Oklahoma ($1.36), Missouri ($1.32), Tennessee ($1.27), Mississippi ($2.02) and Louisiana ($1.78).
Comparing the amount of federal taxes sent to Washington with the amount of federal spending coming back to the state

Articles from the Tax Foundation