Pro-Small Business Tax Relief on a Roll in Arkansas

By SBE Council at 28 May, 2026, 7:52 am

by Raymond J. Keating -

Tax relief has been on a roll in Arkansas, and it's continuing. That's good news for entrepreneurs, small businesses and investors.

Governor Sarah Huckabee Sanders (R) called a special session to continue with the state's ongoing income tax cuts.

In a piece published two years ago, I explained positive tax changes in Arkansas at that time:

"Specifically, the state's top marginal income tax rate on individuals was reduced in 2024 from 4.4 percent to 3.9 percent. For good measure, Arkansas has a 50 percent exclusion for most capital gains, which means the individual capital gains tax rate has been reduced from 2.2 percent to 1.95 percent. By the way, as recently as 2015, the state's top individual tax rate was 6.9 percent. Moreover, Arkansas' corporate income tax rate has been reduced this year from 4.8 percent to 4.3 percent. Again, this rate is notably lower than the 6.5 percent rate prevailing in 2015."

Earlier this month, Huckabee signed legislation that reduced the top personal income tax rate to 3.7 percent, retroactive to January 1 of this year. For good measure, the corporate income tax rate will decline to 4.1 percent as of January 1, 2027.

Sanders has said that she wants to completely phase out the state's individual income tax.

The tax relief measures that already have been passed in Arkansas certainly improve that's state's competitive position. And eliminating the state's individual income tax would make Arkansas, from a tax perspective, one of the most attractive places in the nation to live, work, and start up, invest in and build a business.

Related Content: See Americans for Tax Reform's "Cutting Taxes Across America" Income Tax Map. Now in its 6^th year, the map provides information about various state income tax rates. Twelve states cut income taxes in 2025.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. He is the author of " The Weekly Economist " book series, and 10 Points from Walt Disney on Entrepreneurship .