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Arkansas governor: No grocery tax rise

He sends letter to task force by Michael R. Wickline | May 4, 2018 at 4:30 a.m.
Gov. Asa Hutchinson is shown in this file photo.

Gov. Asa Hutchinson said Thursday that he doesn't support increasing the state's sales tax on groceries.

The Republican governor made that clear in a two-page letter to the members of the Arkansas Tax Reform and Relief Legislative Task Force, which decided last week to study the option of raising the sales tax on groceries and creating an income tax credit for low- to moderate-income people as an offset.

"There is a lot of clamoring out there and talking about the governor not supporting [the existing sales tax exemption for groceries], but he absolutely has always supported it, from before the legislation was signed into law back [in 2007]," Hutchinson spokesman J.R. Davis said when asked why the governor sent the letter.

"Because this continues to be a topic of conversation, he wants them to know exactly where he stands on the grocery tax," Davis said.

By law, the task force is required to issue recommendations by Sept. 1 on changing the state's tax structure. The recommendations will go to the General Assembly and governor for consideration in the 2019 regular session.

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

In 2015 and 2017, the Legislature enacted his plans to cut individual income tax rates for people with up to $75,000 a year in taxable income. These cuts are together projected to reduce revenue by about $150 million a year.

But the idea of raising the state's sales tax on groceries drew the ire this week of some Republicans, such as Jefferson County Republican Committee Chairman Peter Smykla Jr., who said in a news release that "increasing taxes is NOT what the Republican Party stands for." It also brought opposition from Democrats such as gubernatorial candidate Jared Henderson, who said he would never go for such a change if elected.

In response to Henderson, Hutchinson said in a written statement, "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 comment overshadowed his other statement that he continued to support eliminating the sales tax on groceries.

State Rep. Charlie Collins, R-Fayetteville, who last week tossed around the idea of raising the sales tax on groceries and creating a sales tax credit as an offset for low-income Arkansans, tweeted on Wednesday, "I admire Governors courage to be open to #arleg study/ideas."

In response to Collins' tweet, a former consultant to the tax-overhaul task force, Randy Bauer, tweeted Wednesday, "You don't enact meaningful reform by bending to the political winds. Kudos to the Governor and the Task Force (and you) by considering meaningful reform."

The sales tax on groceries is 1.5 percent. It is scheduled 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. The 0.125 percent tax is for conservation and levied by the constitution.

From 2007 through 2011, the Legislature gradually reduced the sales tax on groceries from 6 percent to 1.5 percent based on the recommendation of then-Gov. Mike Beebe, a Democrat who defeated Hutchinson in the 2006 general election. The state Department of Finance and Administration has estimated that the 1.5 percent grocery sales 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 would 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.

In his letter to the task force, Hutchinson said he has been a longtime and consistent supporter of eliminating the sales tax on groceries and "in fact, the final reduction of the sales tax [to 0.125 percent] is part of the budget I presented to the Legislature and was adopted by the General Assembly earlier this year.

"My position has not changed," he wrote. "I do not support raising the sales tax on groceries."

The reduced sales tax charged on groceries eases the financial burden of low-income Arkansans, seniors and others who are on a limited budget, and it is an exemption worthy of continuation, Hutchinson said.

"I have tremendous respect for the General Assembly and cherish our strong working relationship. For that reason and for the fact that this is a legislative task force, I have chosen to stay out of much of the debate with regard to the elimination of certain tax exemptions.

"However, as the grocery tax exemption remains a topic of continued debate, it is important for me to inform you of where I stand on this important issue," Hutchinson wrote in his letter.

Lt. Gov. Tim Griffin said Thursday, "We should not raise the grocery tax.

"The overriding concern of Arkansas taxpayers is not that they should pay more of one tax and less of another," the Little Rock Republican said in a written statement. "It is that government spends too much and Arkansans pay too much in taxes period. Rearranging deck chairs doesn't fix that."

Jefferson County Republican Party Committee member Stu Soffer of White Hall said Thursday that "the Governor's letter to members of the Legislative Tax Reform and Relief Task Force is but one more reason why I strongly support his re-election.

"He walks his talk," he said.

In the May 22 Republican primary election, Hutchinson faces a challenger, Jan Morgan of Hot Springs.

Morgan said Thursday in a text message to this newspaper that it's interesting that Hutchinson "made this decision after my complaining about it for a month on tv, radio and my social media pages."

Henderson of Little Rock, who is vying with Leticia Sanders of Maumelle for the Democratic nomination for governor, said Thursday in a written statement, "I'm glad to hear Asa Hutchinson finally broke his silence on this issue as the Republican-controlled General Assembly has tossed around the idea of increasing the grocery tax for the past month."

Sen. Jason Rapert, R-Bigelow, who sponsored the 2013 law under which the sales tax on groceries is to drop on Jan. 1, said Thursday that he's "very, very pleased" that Hutchinson is reiterating his support for exempting groceries from the sales tax.

"People will be keeping millions of dollars in their pockets to take care of their families and it's the appropriate thing to do," he said.

Regarding Hutchinson's letter to the tax-overhaul task force, Jean said, "I get it. The governor is in campaign season."

"It's pretty early in the game to be backing off something you haven't recommended," he said. "I think the task force was looking to be fair for everybody."

Jean said he would consult with the other task force co-chairman, Sen. Jim Hendren, R-Sulphur Springs, on how to proceed regarding the study of the grocery sales tax and income tax credits.

Hendren, the nephew of the governor, said he would like the task force to continue studying this option to find out who gets the most benefit.

"We will continue to look at the tax code from top to bottom," he said.

Thirty-two states and the District of Columbia exempt most food purchased for consumption at home from the state sales tax, according to a report from the Center on Budget and Policy Studies.

Six states, including Arkansas, Missouri and Tennessee, tax groceries at lower sales tax rates than other goods, and four states, including Kansas and Oklahoma, fully tax groceries, but offer credits or rebates offsetting some of the taxes paid on food by parts of the population, the center reported.

Three states, including Alabama and Mississippi, continue to apply their sales tax fully to food purchased for home consumption without providing offsetting tax relief for low- and moderate-income families, the report said. Forty-five states levy sales taxes.

Photo by Staton Breidenthal
Rep. Charlie Collins, R-Fayetteville

A Section on 05/04/2018

Print Headline: Hutchinson: No grocery tax rise

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