The state of Arkansas announced the enactment of Senate Bill 1 during its 94th General Assembly, introducing significant personal income tax and corporate income tax reductions.
The bill lowers corporate income taxes by changing the top rate from 4.8% to 4.3%.
Previously, a 4.8% tax rate was applied to net income above USD 11,000. In its first 18 months, it will save Arkansas businesses about USD 99.3 million, and then the savings will be about USD 66.2 million every fiscal year. An estimated 7,800 corporations will get a tax cut, according to a fiscal impact statement by the state Department of Finance and Administration.
The Senate Bill 1 also reduces individual income taxes for about 1.1 million Arkansas taxpayers by reducing the top rate from 4.4% to 3.9%, saving taxpayers USD 384.2 million next year and USD 256.1 million in the following years. The savings are higher next year because they include 18 months of savings from 1 January 2024 to 30 June 2025.
According to the Arkansas Department of Finance and Administration’s fiscal impact report, the tax cuts will diminish the state’s general revenue by a total of USD 483.5 million in fiscal year 2025, beginning 1 July, 2024. Subsequently, each fiscal year will see a reduction of USD 322.2 million.
This adjustment will affect tax years beginning on or after 1 January, 2024.
