Seriously?
Tax reformers in Arkansas are looking at raising the sales tax on groceries?
That was the news last week from the Arkansas Tax Reform and Relief Legislative Task Force.
The panel, which will make recommendations by Sept. 1 to Gov. Asa Hutchinson and the Legislature, honed in on a list of sales tax exemptions for further review as they consider which ones they may want to end.
Right there in the big middle was an option to reduce the hard-won sales tax exemption on groceries.
It is on the list for a simple reason, the same reason it was so hard for the state to cut the sales tax on groceries years ago: This is a poor state and people spend much of their income on food. Taxing groceries can generate a lot of revenue.
Or it once did, until former Gov. Mike Beebe made cutting that particular tax his administration's cause celebre.
The issue was a key element in Beebe's first campaign for the governor's office. It was a popular plan, one that had been pushed unsuccessfully by some lawmakers in past years. But, with Beebe in the governor's office, those looking to give families a tax break on such staples finally succeeded.
Necessarily, the cuts happened gradually. The state budget couldn't absorb them all at once. But what had been a 6 percent sales tax on groceries dropped to 1.5 percent over several budget cycles. And, it is supposed to drop to 0.125 on Jan. 1.
That compares to the current 6.5 percent standard sales tax in Arkansas.
So, just as the state is getting that onerous tax down to nearly nothing, here comes this task force looking at send it in the other direction.
Last week, state Rep. Lane Jean, R-Magnolia and co-chairman of the task force, said they'd look at hiking the grocery tax to 3 percent, 4.5 percent or 6 percent.
Importantly, the increases would be considered in conjunction with another plan to offset the grocery tax hike for Arkansans with low and moderate incomes. They're talking about some sort of income tax credit or maybe a sales tax rebate for qualifying taxpayers.
Whatever it might turn out to be, it promises to be more confusing than saving on sales taxes at the grocery counter.
All of this talk about pumping up the grocery tax is part of a larger plan to fund further cuts in the state's income taxes, which is Gov. Hutchinson's cause celebre.
He's been working on reducing state income taxes since he got in office, starting with cuts for Arkansans with lower and middle incomes. He wants to provide cuts, too, for higher-income earners.
That was part of the motivation behind this tax reform and relief task force.
However, more income tax cuts, especially on the higher earners, could impact the state's budget so much that the state would have to find revenue somewhere else.
That reality led to the panel's initial review of all sales tax exemptions and then last week's paring to a smaller list, including the grocery tax. Again, it's the one with the greatest potential impact on that nagging bottom line.
Together, the first two rounds of income tax cuts under Hutchinson cost the state about $150 million a year. This next one is projected to cost another $180 million a year, if the Legislature approves it.
They're certainly inclined to support further income tax cuts, and that's one of the reasons the task force must be on the lookout for alternative revenue.
As for Hutchinson, he's said that he's reserving any final judgment on these questions until after the task force makes it final conclusions.
He said he has been an advocate for exempting groceries from sales taxes but would look at whatever other relief the task force might recommend for people on limited incomes.
Task force members were themselves divided on the prospective policy shift on grocery taxes. Nevertheless, that's where their study is precariously taking them, and maybe us.
Commentary on 05/02/2018