Arkansas Continues to Cut Taxes, Make State More Economically Competitive

Arkansas has cut taxes again, making the state more economically competitive for individuals, families, and businesses.

Governor Sarah Sanders recently signed legislation advanced by the Arkansas House of Representatives and Arkansas Senate into law that will reduce the state’s top personal income tax rate and the top corporate income tax rate. The top personal income tax rate has been cut to 3.7%, and the top corporate income tax rate has been lowered to 4.1%.

This is the fourth tax cut during Governor Sanders’ administration. Since 2023, Governor Sanders and the Arkansas Legislature have worked together to lower income taxes by 25%, reducing the tax burden for Arkansas citizens and businesses. In total, recent tax cuts have returned more than $1.5 billion to the people of Arkansas.

With the new tax rates, Arkansas now has the lowest income tax rate in the state’s history since the income tax was created.

The new personal income tax rate will be retroactive to January 1, 2026. The new corporate income tax rate will go into effect on January 1, 2027.

Arkansas has attracted increasing recognition for its tax policy. The Tax Foundation published its “State and Local Tax Collections Per Capita by State, 2026” study and ranked Arkansas among the states with the lowest tax collections in the nation. In the study, the Tax Foundation noted, “While outliers do exist, states with lower tax collections per capita have generally opted for a more limited government approach, pairing lower taxes with economic growth strategies focused on attracting residents, workers, and businesses.”

In the most recent “Rich States, Poor States” index, the American Legislative Exchange Council (ALEC) ranked Arkansas as the no. 3 state for recently legislated tax changes. This was one of the many positive rankings for Arkansas which factored into the state being named as the no. 6 state for overall economic outlook.