Tax Credits for Working Families

Arkansas

Earned Income Tax Credit^

Income Tax Rate: Graduated 1-7 percent

State EITC: No

Notes/News: Governor Mike Beebe and the Arkansas General Assembly have continued to reduce the state’s grocery tax as the preferred way to provide low-income tax relief. They cut the tax from 6 percent to 3 percent in 2007, and again down to 2 percent in 2009. Arkansas Advocates for Children and Families is encouraging the creation of a state EITC as a better, more targeted way to provide low-income tax relief.

On March 30, 2011, the Arkansas governor signed into law HB 1056, which creates a credit for Heads of Households with two or more dependents, thus exempting all families below the poverty line from paying state income taxes. This closes a loophole in legislation enacted in 2007 to ensure no working poor family had to pay state taxes.

Reports/Materials: Arkansas State & Local Taxes, from Who Pays? A Distributional Analysis of the Tax Systems in All 50 States, Institute on Taxation and Economic Policy, January 2013

8 Principles to Guide Tax and Budget Policy, Arkansas Advocates for Children & Families, January 2013

Arkansas: State and Local Taxes in 2007, Institute on Taxation and Economic Policy, November 2009

Child Tax Credit^

State Credit:

No

Child and Dependent Care Tax Credit^

State Credit: Yes

Refundable: Yes

Tax Credit Eligibility: Same as federal child and dependent care credit eligibility1

Tax Credit Formula: 20 percent of the federal child and dependent care credit2

Notes/News: Taxpayers claim the credit by completing line 39 of form AR1000 and attaching a copy of their federal child and dependent care credit form.

The refundable credit is only available for care of a child under age six in an “approved child care facility.” Arkansas also has a nonrefundable credit of 20 percent of the federal CDCTC with the same maximum payments.

Property Tax Circuit Breaker^

Circuit Breaker: No

Reports/Materials: Idea 9: Enact a Property Tax Circuit Breaker,” Sarah Beth Coffey and Alan Essig, Center for a Better South, Doing Better: Progressive Tax Reform for the American South, June 2006