What Changes in Your Paycheck in Arkansas
Your paycheck in Arkansas shows an Arkansas state income tax line item that grows progressively with income, starting at 2% for the first $1. However, because the brackets are extremely compressed (only three brackets), virtually all middle and high earners immediately reach the 5.9% rate on almost all income. For a $1 salary, you might see ~ $1 annually (~ $1 per biweekly paycheck) for state tax, reflecting that most income is taxed at 5.9%. Arkansas paychecks only show state and federal tax deductions—no local income tax line items. The progressive brackets are so compressed that Arkansas effectively operates like a flat 5.9% tax state for most taxpayers. Retirees see no state tax on retirement income distributions, making Arkansas attractive for those relying on retirement savings.
Example State Tax in Arkansas
What you'll pay in Arkansas state income tax at different salary levels (single filer, no deductions):
| Gross Salary | State Tax (Year) | Effective Rate |
|---|---|---|
| $50,000 | $2,695 | 5.4% |
| $75,000 | $4,170 | 5.6% |
| $100,000 | $5,645 | 5.6% |
| $150,000 | $8,595 | 5.7% |
Use the calculator above to see your exact take-home pay with your filing status and deductions.
Understanding Arkansas Taxes
Who Benefits
Arkansas works best for retirees who benefit from exemptions on Social Security and most retirement income, making the state attractive for those relying on retirement savings. The effective 5.9% income tax rate (due to compressed brackets) is moderate compared to higher-tax states. However, Arkansas's very high sales tax rates (up to 11.625% in some areas) mean big spenders pay significantly at the point of sale. Savers and retirees who spend modestly may find Arkansas's structure favorable due to the retirement income exemptions.
Who May Not Benefit
Arkansas is challenging for big spenders due to the very high combined sales tax rates (up to 11.625% in some areas, among the highest in the nation), and lower-income workers who spend a high percentage of income on taxable goods face a regressive tax burden. Someone earning $1 who spends $1 annually on taxable goods might pay $1 in income tax (5.9% effective) plus $1-$1 in sales tax (6.5%-11.625%), totaling $1-$1 (11.1%-15.2% of income). The high sales tax disproportionately affects lower earners. If you're a big spender or lower-income worker, states with lower sales taxes may be more favorable.
Key Facts That Affect Your Take-Home Pay
- Arkansas uses a progressive income tax system with three brackets, starting at 2% for the first $1 of income (for all filing statuses) and escalating to a top rate of 5.9% for income above $1, making Arkansas's bracket structure the simplest among progressive states with compressed brackets at low income levels.
- Arkansas's progressive brackets are extremely compressed, meaning the first two brackets cover only the first $1 of income, so virtually all middle and high earners immediately reach the top 5.9% rate. For a $1 earner, ~ $1+ of income is taxed at 5.9%, making the effective rate very close to the flat 5.9% rate.
- Arkansas does not levy income taxes locally, so your paycheck shows the same deductions statewide. All Arkansas residents have the same income tax structure—only the state progressive brackets apply.
Common Mistakes People Make
Misconception: 'Progressive tax means I'll pay different rates across brackets in Arkansas.' Reality: Arkansas's progressive system is so compressed (only three brackets, with the first two covering just $1) that virtually all taxpayers earning above $1-$1 pay the top 5.9% rate on almost all their income. A $1 earner pays 5.9% on ~ $1+ of their income, making their effective rate around 5.8%-5.9%—essentially a flat 5.9% rate for most taxpayers. The 'progressive' label is technically accurate but practically irrelevant for most earners.
Misconception: 'Arkansas has low taxes because it's a low-income state.' Reality: Arkansas's income tax is effectively a flat 5.9% for most earners (due to compressed brackets), which is higher than many flat-tax states like Pennsylvania (3.07%), Indiana (3.15%), or North Carolina (4.75%). Additionally, Arkansas's combined sales tax rates (up to 11.625% in some areas, among the highest in the nation) create a significant total tax burden. Lower-income residents pay a large percentage of income to sales tax, while higher earners pay 5.9% income tax.
Misconception: 'No local taxes means Arkansas is cheaper than other states.' While Arkansas avoids local income tax complications, the effective 5.9% income tax rate combined with very high sales taxes (up to 11.625% in some areas, among the highest in the nation) and property taxes can create a significant tax burden. A big spender in Arkansas might pay more in sales tax than they'd pay in income tax in some other states. Factor in all taxes when comparing Arkansas to other states.
One Thing to Know
Arkansas has one of the most compressed bracket structures in the nation—only three brackets covering just $1 total. This means someone earning $1 pays the same top rate (5.9%) as someone earning $1, which surprises many people who expect progressive systems to benefit lower earners more.
Important Notes
These calculations are estimates based on current tax law. Your actual take-home pay varies based on:
- Pre-tax deductions (401(k), health insurance, HSA, etc.)
- Your W-4 withholding elections
- Additional income or deductions at tax time
- Individual circumstances and tax situations
Tax rates are subject to change. Federal and state tax laws may be updated annually. This is not tax advice. For personalized help, consult a tax professional familiar with Arkansas tax laws.