Gov. Mike Beebe has been steadfast in getting the Legislature to lower the state sales tax on one of life’s essentials - food - but he was caught short when asked whether he’d thought about doing the same for another, drinking water.
He has led an effort that has lowered the state salestax rate from 6 percent to1.5 percent on groceries.
But has he given any thought to working to reduce the tax on water?
When asked, he was briefly at a loss for words.
“Uhhhh,” he said. “Let me get back to you on that, OK? Give me about an hour.”
“Clearly, we have not thought about it,” spokesman Matt DeCample added.
The governor said hisfirst priority is to eliminate the grocery tax.
In January 2007, in his first State of the State address as governor, he told lawmakers, “We have a moral charge to rid our state of its most regressive tax, the state sales tax on food.”
The following month, when the tax-cut legislation cleared the state Senate and was sent to him, he praised the action because it was reducing a tax on people’s basic necessities.
Since then, the state salestax rate has been reduced to 1.5 percent on groceries.
But water, including tap water for drinking, continues to be taxed at the state’s highest rate, 6 percent.
Tap water is also taxed by cities and counties at their highest general sales-tax rates.
Those taxes apply to water for human consumption, such as drinking or cooking, no different than to water used for baths, showers and other nice but not absolutely essential purposes, such as lawns and swimming pools.
Bottled water offers no escape from taxation - it’s subject to the sales tax, too, and the state’s 21 cents-pergallon soft-drink tax applies to most flavored bottled waters.
With daytime high temperatures near 100 around much of the state, water consumption has been climbing, as it normally does during the torrid summer.
After he had taken time to deliberate on the question, Beebe dropped by the state Capitol pressroom and offered this further response: “We’re going to concentrate on food, get that done. Then, after we get that done, we can look at anything.”
Weeks earlier, Beebe was asked whether he might attempt a fourth reduction in the tax on groceries in next year’s “fiscal” legislative session rather than in the next “regular” session.
He replied that tax-cut proposals usually are taken up in regular sessions, notfiscal sessions.
He is in his final term as governor, a four-year term that runs for another 3 1/2 years, which means he has only one more regular session in which to seek lower taxes on life’s essentials. That opportunity won’t come until 2013. He could call a “special” session and undertake it then, were he so inclined.
When asked whether water would be on his radar now that he has been asked about it, Beebe said, “Not really. What’s on the radar right now is food.”
Arkansas Advocates for Children and Families supported the grocery-tax reduction, but executive director Rich Huddleston said the group has not studied the sales tax on water.
John Theis, assistant commissioner of state revenue, said Arkansas Code Annotated 26-53-301(1) imposes sales tax on sales of natural or artificial gas, electricity, water ... or any other tangible personal property sold as a utility or provided as a public service.
Theis said the state Department of Finance and Administration lacks sufficient reporting records to determine how much revenue is collected from the state and local sales taxes on water.
“Many sellers of water also sell other taxable items or services, and report the total tax collections from all taxable sales in a lump sum amount,” he explained.
For example, he said, Carlisle, Fort Smith, Russellville, Fayetteville, “and many other cities” include both water and trash collection on the same bill and report the tax collections as a total amount.
The cities of Bentonville, Jonesboro, “and possibly others” include water, trash and electricity on the same bill and report the tax collections as a total amount, Theis said.
He said Conway includes water, trash, electricity and cable television on the same bill and reports total collections to the state.
“There is no way for the department to separately identify water sales from the taxes reported by those sellers reporting taxable sales in addition to water,” he said.
Some sort of economic analysis perhaps could give an idea of how much is collected from sales taxes on water but that would likely take some time, Theis said.
The tax on water isn’t limited to water at home. It also applies to water used for business and industrial purposes, Theis said.
In Little Rock, the tax on water includes a 6 percent state tax, a half-percent city tax (soon to climb to 1 1/2 percent if Little Rock voters OK the increase in a September election), and a 1 percent county sales tax: total 7 1/2 percent now, perhaps 8 1/2 percent next year.
Theis said the state is not allowed to reveal how much revenue is raised by the taxes imposed through, for example, Central Arkansas Water, which sells water to more than 398,000 customers in central Arkansas, including Little Rock and North Little Rock, all of Pulaski County and to wholesale customers in parts of Lonoke and Saline counties, said Samantha Williams, a communications assistant with Central Arkansas Water.
Theis cited Arkansas Code Section 26-18-303, which provides that the director of the state finance department is required to maintain the confidentiality of all records and files concerning the administration of any state tax law.
“Any information contained in these records and files shall not be divulged or disclosed by the director,”Theis said, citing A.C.A. 26-18-303(a)(2).
“Consequently, state law prohibits the release of information related to any specific seller of water,” he said.
What the state is not allowed to do, however, Central Arkansas Water is allowed to do.
Jeff Mascagni, a controller in the utility’s customer service and finance department, said that in 2010 it collected $4,645,615 in sales taxes.
Central Arkansas Water collects the taxes and remits the money to the state, which then allocates the money back to the appropriate governmental entity that levied the tax, he said.
In fiscal 2010, Mascagni said, that included $3,723,768 for the state sales tax. Little Rock’s tax total was $202,360, North Little Rock’s $72,825, Maumelle $368, Sherwood: $50,323, and Pulaski County $595,971.
Central Arkansas Water didn’t have figures for itssales to customers in Lonoke County and Saline County because those are wholesale sales, Mascagni said. “We pass the water along to them, and they bill their own customers,” he said.
He also said Central Arkansas Water bills include a 30-cent charge per month called the federal Safe Drinking Water Act charge.
For customers who use a lot of water, there’s also a surcharge. It applies when a customer’s meter shows usage of about 25,000 gallons or more in a month, said Williams. The surcharges totaled $934,096 in Little Rock and in Pulaski County areas in fiscal 2010 and $211,877 in North Little Rock.
The sales taxes on those surcharges pulled in $4,670 in Little Rock in 2010. In North Little Rock, they pulled in $2,118, Williams said.
Front Section, Pages 1 on 07/31/2011