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The possibility of increasing the state's sales tax on groceries has drawn opposition from Democratic gubernatorial candidate Jared Henderson, who said Tuesday that he would never go for such a change if elected.

Henderson said in a written statement that Republican Gov. Asa Hutchinson, who wants to cut the state's top individual income tax rate, "stands silent as the General Assembly toys with the idea of making it more expensive for working families to buy groceries."

Hutchinson countered that he has been a consistent supporter of eliminating the sales tax on groceries and his position hasn't changed.

"This is the political season and it is expected that unfounded attacks will occur regularly, but it is disappointing that candidates are afraid of legislative review and debate," the governor said in a written statement. The Legislature's tax overhaul task force has made no recommendations, he noted.

In a divided voice vote last week, the Arkansas Tax Reform and Relief Legislative Task Force opted to take a closer look this summer at the option of raising the sales tax on groceries and creating either a refundable earned income tax credit or an income tax credit for people with low to moderate incomes to offset the increase.

The task force also decided that additional revenue raised by repealing any tax exemptions, as recommended by the task force, be used for future tax cuts.

In March, officials for the right-leaning Tax Foundation and left-leaning Institute of Taxation and Economic Policy, both in Washington, D.C., told the task force that the state would be better off providing a targeted income-tax credit to low-income families rather than charging a 1.5 percent tax rate on groceries.

The idea of increasing the grocery sales tax and creating a tax credit has divided both Democrats and Republicans.

The Jefferson County Republican Committee announced Monday that it unanimously voted last week to oppose increasing the sales tax on food. Committee Chairman Peter Smykla Jr. of Pine Bluff said he asked for the committee's position to be included in the state Republican Party platform for consideration at the party's convention in July.

"It is our opinion that the sales tax rate of 1.5 percent should remain the same, or preferably, be removed completely," Smykla said in a written statement.

Hutchinson has signaled that he wants the 2019 Legislature to cut the state's top individual income tax rate from 6.9 percent to 6 percent, which he projects would reduce tax revenue by about $180 million a year.

In 2015 and 2017, the Legislature enacted Hutchinson's plans to cut individual income-tax rates for people with up to $75,000 a year in taxable income, which are collectively projected to reduce revenue by $150 million a year.

The tax overhaul task force is required to issue its recommendations to the General Assembly and Hutchinson by Sept. 1.

The sales tax on groceries is 1.5 percent. It is set to drop to 0.125 percent, effective Jan. 1, under a 2013 law that allows the use of the state's savings from ending desegregation payments to three Pulaski County school districts to finance that tax cut of about $68 million a year.

From 2007 through 2011, the Legislature gradually reduced the grocery tax from 6 percent to 1.5 percent based on the recommendation of Democratic Gov. Mike Beebe, who defeated Hutchinson in the 2006 general election. The state Department of Finance and Administration has estimated that the 1.5 percent tax reduced revenue by $248.9 million in fiscal 2017, including $190.6 million in general revenue.

A task force co-chairman, Rep. Lane Jean, R-Magnolia, said last week the task force will look at three proposals -- increasing the grocery tax to 3 percent, 4.5 percent or 6 percent -- and creating either a refundable earned-income-tax credit, for those who work, or refundable income-tax credit. The task force also will consider whether to subsidize a family with taxable income of $40,000 or under $30,000 a year.

Henderson of Little Rock said in his written statement that "raising the grocery tax should never even be up for discussion and as governor you can bet I would fight any attempt to raise this tax that hits our working families the hardest."

He said that providing a refundable tax credit for low-income Arkansans to compensate for the increased grocery tax would make little difference at the cash register for families with a tight budget.

While noting he has consistently supported eliminating the grocery sales tax, Hutchinson of Rogers said in his written statement that "the final reduction of the sales tax is part of the budget I presented to the Legislature and was adopted by the General Assembly." The remaining tax to which groceries would be subject, the 0.125 percent rate, is levied under the conservation sales tax amendment in the constitution.

Hutchinson is seeking re-election to his second four-year term this year.

Republican gubernatorial candidate Jan Morgan of Hot Springs has repeatedly panned the Legislature's tax overhaul task force and said she opposes repealing any tax exemptions. Democratic gubernatorial candidate Leticia Sanders of Maumelle has said she favors a constitutional amendment to exempt groceries.

Sen. Jim Hendren, R-Sulphur Springs, who is a task force co-chairman and whose uncle is Hutchinson, said, "There is no effort to just raise the grocery tax and make a net tax increase."

People with higher incomes benefit more from the reduced sales on groceries than people with low and moderate incomes, and creating a tax credit for people in lower income groups would target tax relief to those more in need, Hendren said.

Metro on 05/02/2018

Print Headline: Grocery-tax review criticized; Hutchinson hails debate; challenger opposes talk of rise

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Archived Comments

  • TimberTopper
    May 2, 2018 at 5:27 a.m.

    This is just another way of doing the tax cut for the rich, then raising tax on those with lower incomes to have a negative tax loss. Republicans at work.

  • RBear
    May 2, 2018 at 7:30 a.m.

    Hendren's comments about the impact of grocery sales tax is unfounded and not backed with fact. All studies have shown that a sales tax is a regressive sales tax and even the suggestion that a tax credit is needed to offset any impact proves the point. The problem with tax credits is that that they come in the following year when taxes are filed. Low to moderate income families need the money now, not then. Using a tax credit is a Republican money swap that always benefits the state and not the taxpayer.

  • Libertarian
    May 2, 2018 at 7:37 a.m.

    How you like your Republicans now? Government shouldn't take the first bite off your child's plate.

  • golfreferral
    May 2, 2018 at 7:41 a.m.

    I am from tax happy California. And they don't have a grocery tax. I was astounded when I moved to Arkansas. And realized my food was being taxed. Unbelievable.Gangsters.

  • hah406
    May 2, 2018 at 8:17 a.m.

    First off, the legislature promised us a reduction in the grocery tax to 0.125% when the desegregation payments ended. They are ending. Keep your promise. Second, it is very difficult at the state level to provide refundable tax credits. Third, sales taxes are the most regressive form of a tax, and hit the poor much harder than the rich. Finally, I am pretty sure that reducing that top income tax rate won't cause one single person to move to Arkansas, and keeping it where it is won't cause one single person to leave Arkansas.

  • Quackenfuss
    May 2, 2018 at 8:39 a.m.

    All I can add to the five previous comments is amen, amen, amen, amen and amen.

  • RBBrittain
    May 2, 2018 at 8:53 a.m.

    And five more Amen's. We need to know every single person who thought of this inane (or like Casey Laman in George Fisher's cartoons, "asinine!") idea so we can VOTE THEM OUT in November. Even Jason Rapert, as crazy as he is (yes, he needs to be voted out too), is against it if only because he sponsored the bill hah406 referred to; if that cut didn't happen it would be HIS broken promise.

  • censusguyzgmailcom
    May 2, 2018 at 8:57 a.m.

    A$A isn't going to be the candidate henderson has to beat.

  • Knuckleball1
    May 2, 2018 at 9:14 a.m.

    Tax the poor and the working poor that are trying to make ends meet, but give the people that has the most money a tax break... Makes a lot of sense doesn't it, well anything that comes from the idiots in the State House comes as no surprise. More of them need to get caught and go to jail.

  • Whippersnapper
    May 2, 2018 at 9:20 a.m.

    Part of the problem is that the "private option" was only a net fiscal benefit for the State through 2017. All the folks that were pushing it so hard because it would mean less money flowing out of state coffers for the first few years are now stuck with the program they pushed which now becomes a net negative on the state coffers and they are scrambling for ways to fund it. Turns out that the "free money" was one of those where you get "free money" for a few years and then have to pay out the wazoo.
    .
    The original estimates from DHS were that the net cost to the state by 2023 are something like $900 million more than not expanding Medicaid would have been, but the way it worked out was the state got an extra $300 million or so from 2014-2017 and then has to pay an extra $1.2 Billion from 2018-2023 to get that net positive of $900 Million. The "conservatives" jumped at the "free money" for the first few years as a way to let them cut taxes under Beebe, and now they are realizing that the bill is coming due and they lack the spine to admit they were wrong.

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