LITTLE ROCK — Attorney General Dustin McDaniel has certified a ballot title and popular name for a proposed constitutional amendment that, if adopted, would repeal all state taxes levied by the General Assembly and require a single sales-tax rate, effective July 1, 2012.
The General Assembly would be required to determine the tax rate and the distribution of the revenue.
The proposal was submitted by attorney Chris H. Stewart of Little Rock representing a Fort Smith-based organization, Arkansas Progressive Group.
McDaniel’s certification clears the way for supporters to try to gather 77,468 signatures from registered Arkansas voters by July 2 to qualify the proposed amendment for the Nov. 2 election ballot.
The ballot title and popular name are what voters would see if the proposal makes it to the ballot.
The popular name is “A Constitutional Amendment to Repeal All State Taxes and Establish a Flat Rate Sales Tax.”
Supporters call the proposal “AR One Tax.”
The measure is not intended to affect existing state revenue and leaves the flatsales-tax rate up to the General Assembly to satisfy that intent, said Brandon Woodrome of Fort Smith, chairman of the Arkansas Progressive Group.
The amendment is aimed at simplifying tax laws by reducing the state’s administrative costs and taxpayers’ cost of compliance with the laws.It’s also aimed at taxing “once and only once new consumable goods and services sold in the state,” he said.
“To maintain current state revenue,” the group figured that the rate of the flat sales tax will have to be between6 percent and 8 percent, Woodrome said. The state sales-tax rate is already at 6 percent, which raises less than half of the total revenue produced by all of the taxes now in place.
He said the sales-tax base would be larger under the proposed amendment through the elimination of sales-tax exemptions and that the rate may have to be higher than between 6 percent and 8 percent.
“However, we will be the first to concede ‘We are just a few rednecks with a spreadsheet,’” he said in an e-mail.
The group has started to solicit bids for an economist to hypothesize “the revenue neutral rate,” he said.
The state collected $6.6 billion in general and special revenue minus income tax refunds in the past fiscal year, said technical assistance manager Whitney McLaughlin of the state Department of Finance and Administration. That includes $2.7 billion in sales and use taxes last fiscal year of which more than 75 percent were collected at the 6 percent rate, she said.
Woodrome, 22, said he owns Heatherwood Homes LLC and is a Fort Smith planning commission member. He lost a race for the state House of Representatives to state Rep. Stephanie Malone of Fort Smith in a Republican primary in 2008.
Jett Harris of Fort Smith also is a member of the ballot question committee. Harris, 35, is vice president of Wilson Brothers Construction and a partner in FFH Land Development.
The Arkansas Progressive Group reported receiving contributions totaling $1,395 and spending nothing through the end of November in its latest filing with the state ethics commission.
Woodrome said the proposed constitutional amendment will depend heavily on supporters and volunteers for collecting signatures. The group estimates that it will cost between $200,000 to $250,000 to get the proposal on the ballot, he said.
McDaniel said in a letter last week to Stewart that he certified a substituted popular name and ballottitle in place of the group’s latest proposal “to ensure that the popular name and ballot title, when construed together, accurately set forth the purpose of the proposed amendment.”
McDaniel said the proposed amendment would have complex and far-reaching effects that could lead to it being challenged in a lawsuit.
If the proposed amendment is enacted, the ballot title states that all revenue generated by any tax levied by the General Assembly would cease on July 1, 2012, including revenue from all capital-gains taxes, all corporate taxes, all income taxes, all payroll taxes and all realestate-transfer taxes.
Under the amendment, the sales tax would not be imposed on a taxable property or services purchased in the state for a business purpose or an investment purpose and held for an investment purpose; on a taxable property taxed at the initial retail level and transferred by a subsequent sale; on education tuition for primary,secondary or post-secondary level education and job-related training course; and on services required by federal, state or local laws to be performed by a person.
The rate of the sales tax determined by the General Assembly “may impact current revenue and state services,” according to the ballot title.
The General Assembly may change the initial rate of the flat sales tax by a vote of at least three-fourths of the House and the Senate, the measure states. Woodrome said it would take a majority vote of the House and the Senate to set the initial rate and a three-fourths vote to later lower or increase that rate. He said it’s his understanding that the proposed amendment doesn’t need to specify the requirement for a majority vote to set the rate.
The proposed amendment would not affect the power of a county or municipality to levy local taxes, it says.
Woodrome said the measure would repeal state motor fuel taxes, severance taxes, tax exemptions enacted for sales,income and other taxes, and the one-eighth sales tax for conservation, but not the constitutional requirement that school districts levy 25 mills in property taxes for school maintenance and operations.
Tim Leathers, deputy director of the state Finance Department, said department officials “are not sure what taxes it would repeal and what taxes the Legislature would be allowed to levy. It is going to take a lot of time for us to figure out what we think it does and or what the court would rule it does.”
Gov. Mike Beebe has not read this proposal yet, said his spokesman Matt DeCample, but “previous discussions of a flat tax during Gov. Beebe’s career have concluded that the massive sales tax that you would need to provide state services would be damaging to our state economy, our businesses and our border towns.”
Arkansas, Pages 11 on 01/13/2010