After his bill that would phase out the state's soda tax fell short of clearing the Arkansas House of Representatives for the third time in two days, Rep. Lanny Fite, R-Benton, said Wednesday that he is shelving the bill.
"I'll not be running it again," Fite said in an interview.
The House's 61-27 vote on House Bill 1546 fell six votes shy of the 67 required for approval in the 100-member House. The bill fell three votes short and then one vote short when considered Tuesday.
HB1546 requires a two-thirds vote of the House and the Senate because it would reduce and ultimately repeal a state law -- Act 7 of the 2nd Extraordinary Session of 1992 -- that was confirmed by a referendum vote in the 1994 general election, according to the state Department of Finance and Administration.
Fite said he was unable to muster the votes for approval because of opposition from hospital lobbyists, who called representatives about it.
Republican Gov. Asa Hutchinson backed the bill.
The soda tax is levied on the sale of soft drink syrup or simple syrup at the rate of $1.26 per gallon, and bottled soft drinks, powders and base products at the rate of 20.6 cents per gallon, the finance department said. Distributors, manufacturers and wholesalers collect the tax.
HB1546 would provide a mechanism to transfer state general revenue to the Medicaid trust fund in amounts that reflect the projected fiscal impact from the gradual reduction and elimination of the soda tax, the finance department said.
Fite told representatives Wednesday, "Medicaid is a $8 billion dollar industry, and we have got one single industry that is taxed for that that does not benefit from it.
"This bill right here will give tax relief to that industry and also to the public and also give to the restaurants and the hospitality industry," he said.
"I know when you have growth [in tax revenue] you either grow government or you can cut taxes, and this bill right here does this over three years," Fite said. "Without growth, the tax will not [be] cut."
Foes of the bill have countered that consumers won't benefit from the tax reduction, and they are worried that the reduced soda tax revenue to the Medicaid trust fund wouldn't be made up by general revenue.
Total sales and use tax general revenue would have to exceed $2.681 billion for the first rate cut, $2.754 billion for the second rate cut, and $2.83 billion for the final soft drink rate cut under the bill.
If the soft drink rate cuts were to occur on July 1 in 2023, 2024 and 2025, the bill would authorize a transfer of funds to the Medicaid trust fund -- $9 million in fiscal 2024; $23.4 million in fiscal 2025; $38.2 million in fiscal 2026; and $39.4 million in subsequent fiscal years, according to the finance department.
Also Wednesday, the House overwhelmingly approved several tax cut measures, including:
• HB1196 by Rep. Craig Christiansen, R-Bald Knob, which would provide a sales and use tax exemption for sales of water used exclusively in the operation of a poultry farm. The bill is projected by the finance department to reduce sales tax revenue by $1.8 million in fiscal 2022 and $2.7 million in fiscal 2023.
• HB1157 by Rep. David Tollett, R-Lexa, which would increase an income tax deduction from $250 to $500 per taxpayer for qualified classroom investment expenses by a teacher for tax years. The bill is projected to reduce general revenue by $237,000 in fiscal 2022.
• HB1054 by Rep. Rick Beck, R-Cedar Ridge, which would extend the "isolated sales" tax exemption on the sale of tangible personal property, specified digital products or a digital code at a special event to a purchaser if the seller is not an established business or the sale is not made in an established manner. The bill is projected by the finance department to reduce sales and use tax revenue by $180,000 in fiscal 2022 and $270,000 in fiscal 2023.
• HB1513 by Rep. Jon Eubanks, R-Paris, which would create an up-to-$3,500 income tax credit for retired law enforcement officers who work cold cases for the Division of Arkansas State Police. The department projects that the bill would reduce state general revenue by $25,000 in fiscal 2023.
State Police Director Col. Bill Bryant told a House committee Tuesday that the agency has one retired officer working on cold cases, and he hopes to expand it to three. The state police has about 30 cold cases, and these retired officers will work on missing-persons cases after the cold cases, he said.
• HB1641 by Rep. Les Warren, R-Hot Springs, which would provide a sales and use tax exemption for sales to the Young Men's Christian Association. The bill would benefit nonprofit YMCAs in Hot Springs and Warren that are not tax exempt, Warren said. The finance department projects that the bill would reduce state sales tax collections by $4,333 in fiscal 2021 and $26,000 in fiscal 2022.