Arkansas Department of Finance and Administration releases updated income tax tables

The Arkansas Department of Finance and Administration has released updated income tax withholding tables.

This is welcome news for 1.1 million Arkansas taxpayers, as they will see an increase in their next paycheck.

About 80,000 businesses employing over a million Arkansans have received the revised tables. The income tax reduction is a significant outcome of a recent special legislative session. The legislature endorsed the governor’s initiative to lower the top individual income tax rate from 4.4 percent to 3.9 percent.

The legislature has passed several income tax cuts in recent years, but this particular reduction is effective immediately for the tax year 2024. This tax cut will result in savings of over $256 million annually for Arkansas residents.

Many legislators and the governor believe that to be economically competitive with neighboring states, Arkansas must lower or eliminate income taxes. Each tax cut helps the state attract more industries.

The highest corporate income tax rate will decrease from 4.8 percent to 4.3 percent, saving Arkansas-based businesses approximately $66.2 million each fiscal year.

The president of the state Chamber of Commerce, in a recent address, stated that Arkansas has never been more economically competitive, thanks largely to the recent tax cuts enabling businesses to offer higher salaries and invest more in capital.

He also acknowledged the beneficial changes in unemployment insurance tax collections and workers’ compensation rates.

Nonetheless, policymakers remain concerned about the shortage of skilled labor in certain industries. This concern is why state legislators and higher education officials are advocating for programs to attract and retain more college graduates.