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| | Arkansas one of three states to raise taxes by 5 percent-plus, study finds
Wednesday, Jul 21, 2004 By Doug Thompson Arkansas News Bureau Arkansas was one of the three states in the country that raised taxes by more than 5 percent so far this year, according to the study by the National Conference of State Legislatures. New Jersey and Rhode Island were the other two, according to the conference's annual summary of state budget and tax actions. Four states did not have a legislative session this year. "We did that to address the school issue," said Tim Leathers, deputy director of the Arkansas Department of Finance and Administration. The state Supreme Court ordered school reform. The Legislature met the court's ruling with an increase in the state sales tax by seven-eighths of 1 percent, along with extending the tax to services that had not been taxed before. Arkansas' increase was the largest state sales tax increase in the country so far this year, almost twice as big as the next-highest increase, according the study. The 44 states that have finished their budget deliberations raised sales taxes by a total of $526 million, according to the study. Arkansas' share amounts to $360 million of that. "Other states are in the same boat, just farther downstream," Leathers said. They will either be "facing the same thing in the future," or have passed the point of increasing taxes for court-ordered school reform. Suing states over provisions in state constitutions requiring adequate education spending has been a national trend, he said. "This is not our first go-round, either," Leathers said, referring to court-ordered increases in school spending after a 1983 Supreme Court case. "Historically, funding schools has been a continuing issue," he said. Arkansas' sales tax increase has put the state "not at the maximum, but up there in the top for our region," Leathers said. There's at least a chance that a $50 million-a-year-surcharge on state income taxes could drop off, Leathers said. The Legislature passed the 3-percent surcharge in the 2003 regular session to stave off a budget shortfall. The tax has a built-in phase-out if revenue projections increase because of a recovering economy. The state economic forecast for November will determine if the surcharge remains, is partially phased-out, or dropped. State budget pictures improved nationwide, according to the conference's study. This was due to a recovering economy and a big increase in federal assistance to states, the study found. Spending for state-administered Medicaid, a health program for the poor, grew by 13.4 percent in the last fiscal year, the study found. This was the fastest growth by far for any category of spending by states in the fiscal year ending June 30, the report found. The next-highest category was public schools, which grew at an average of 4.9 percent. Overall, states raised taxes, fees and other collections by $3.5 billion in fiscal 2004, compared to $13.1 billion in increases in 2003, the study found. Only one state, Iowa, reported tax cuts of more than 1 percent in fiscal 2003, according to the study. |
