January 13, 2015


State & Local Taxes in 2015


Arkansas Tax Code Features

Progressive Features

• Graduated personal income tax structure

• Provides a low-income tax credit linked to the federal poverty level

Regressive Features

• Provides an income tax exclusion equal to 50 percent of capital gains income

• State sales tax base includes groceries, though taxed at a lower rate

• Local sales tax bases include groceries

• Fails to provide a refundable Earned Income Tax Credit (EITC)

• Fails to provide a property tax “circuit breaker” credit for low-income taxpayers

• Fails to use combined reporting as part of its corporate income tax

Tax Changes Enacted in 2013 & 2014

• Across the board individual income tax rate reduction

• Increased standard deduction

• Capital gains exclusion increased to 50 percent

ITEP Tax Inequality Index

According to ITEP’s Tax Inequality Index, Arkansas has the 11th most unfair state and local tax system in the country. States with regressive tax struc­tures have negative tax inequality indexes, meaning that incomes are less equal in those states after state and local taxes than before (See Appendix B for state-by-state rankings and more details).

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