States Lead in Supporting Business & Entrepreneurs: Arkansas Joins Tax Cutting States

By SBE Council at 31 August, 2022, 10:29 pm

by Raymond J. Keating –

For those of us concerned about the economy and the impact that public policy has on entrepreneurs, businesses, investors and workers, it’s easy to get depressed these days. After all, President Biden and the majorities in Congress seem intent on implementing damaging policies, from more federal spending to increased regulation to higher taxes.

For example, the Inflation Reduction Act managed to get everything wrong in one piece of legislation.

But one can find some hope, and that is coming from the states. The latest sign comes from Arkansas. The individual income tax rate has declined from 5.3 percent to 4.9 percent, retroactive to January 1, 2022. In addition, the corporate income tax rate will decline from 5.9 percent to 5.3 percent as of January 1, 2023. And for good measure, Section 179 small business expensing of capital expenditures was expanded to match the federal level.

On August 11, Governor Asa Hutchinson signed this positive tax relief bill. As explained in a press release from the governor’s office:

“The Arkansas [individual] income tax was instituted in 1929 at a rate of 5.0%. When the Governor was elected in 2014, the income tax rate was at 7.0%, the highest in state history. Today, with the signing of the most recent tax cuts, the state income tax will be lowered to 4.9%, the lowest in Arkansas history.”

According to legislation passed in December 2021, the individual and corporate income tax rates were scheduled to gradually decline through 2025. This latest measure accelerated the relief.

This is a major leap forward for entrepreneurs, businesses, investors, and workers in Arkansas. The state’s competitiveness will improve, and these tax changes will help boost economic, income and job growth.

By the way, as noted by Little Rock public radio, “According to the National Conference of State Legislatures, Arkansas is one of 11 states to cut income taxes this year.” Like I said, hope can be found in the states, including in Arkansas.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. His latest book is The Weekly Economist: 52 Quick Reads to Help You Think Like an Economist.