LITTLE ROCK — Democrats reclaimed the governor’s office in Arkansas 12 years ago after a campaign that hinged on a promise to end the state’s sales tax on groceries. A majority Republican Legislature currently hunting for ways to cut income taxes even further may test just how sacred that promise is.
A legislative task force’s decision last week to study the possibility of raising the state’s sales tax on groceries — and, in conjunction, creating a credit or rebate for moderate and low income residents to offset the tax hike — shows just how much the state has shifted politically since 2006. But a proposal to eliminate or lessen a tax break residents see every time they go to the market still faces an uphill battle in the Legislature, even if it’s intended to clear the way for tax cuts elsewhere.
The Tax Reform and Relief Legislative Task Force is looking at three proposals to raise the grocery tax to 3 percent, 4.5 percent and 6 percent, along with some type of tax credit or rebate for families making less than $40,000 to offset the increase they’d see, said Republican Rep. Lane Jean, who co-chairs the panel. The grocery tax is among a list of exemptions the panel is expected to consider in August as it comes up with recommendations on ways to further cut income taxes in the state.
“Our goal is to have something the task force can agree on and have something the majority of the General Assembly can agree with,” Jean said.
Just exploring the idea of a grocery tax increase is a politically tricky one, even if it’s part of a larger plan to cut taxes overall. The state’s sales tax on groceries has been cut over the past several years to 1.5 percent, with another reduction set to take effect in January that would lower the rate to .0125 percent. The cut was the signature issue of Republican Asa Hutchinson’s Democratic predecessor, former Gov. Mike Beebe.
Beebe defeated Hutchinson in the 2006 governor’s race after the two tangled over the best way to cut the grocery tax, with Beebe calling for its gradual reduction.
“It’s time we eliminate the grocery tax on all food, to put real dollars in the hands of working people,” Beebe said in his first TV ad in the 2006 race.
The grocery tax discussions include a proposal that’s been a longtime aim of Democrats in the Legislature: creating an earned income tax credit for low-income Arkansans. Past efforts to create such a credit have stalled in recent years at the Legislature. Other options include some type of sales tax credit, or pairing the earned income tax credit with a sales tax rebate.
The discussion comes as Hutchinson is running for re-election, touting $150 million in income tax cuts he’s successfully pushed through the Legislature and calling for another $180 million cut for the state’s top earners next year. Hutchinson for now is staying out of the debate, but has highlighted his past support for the grocery tax cut. Earlier this month, Hutchinson said he didn’t see momentum for eliminating that exemption.
Lawmakers on both aisles are already raising concerns about the idea being part of the tax cut talks.
Republican Sen. Jason Rapert, who sponsored the 2013 measure that called for grocery tax’s reduction from 1.5 percent to .0125 next year, said he won’t support anything that winds up reinstating the grocery tax.
“I feel that it’s a moral issue for me that people that are poor in our state or retired or on fixed incomes, that you don’t tax those bare necessities of life,” Rapert said.
The top Democrat in the Senate also expressed skepticism about winning support for a complicated plan that would call for raising a tax that’s on the verge of being cut again.
“I think it’s a hard sell for the people of Arkansas. It’s a hard thing for me to talk to you and explain it to you much less the 85,000 people in my district,” Senate Minority Leader Keith Ingram said.