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Ideas on how to repeal of tax on groceries discussed Friday, Sep 15, 2006 By Rob Moritz Arkansas News Bureau LITTLE ROCK - With both the Democratic and Republican candidates for governor on board, the time is right for eliminating the sales tax on groceries in Arkansas, legislators said Thursday. Members of the House and Senate Interim Committee on Revenue and Taxation discussed a variety of proposals on how to remove the state sales tax from food, though no votes were taken on proposals that members said likely would become legislation for the 2007 regular session. "I don't think there is any question this is going to happen," Sen. Bobby Glover, D-Carlisle, told the committee. Democrat Mike Beebe and Republican Asa Hutchinson both say they favor removing the sales tax on groceries. Hutchinson has pledged to push for an immediate elimination if elected while Beebe has said phasing out the food tax is more likely. During Thursday's meeting, Richard Wilson, assistant director for research services with the Bureau of Legislative Research, said the state's 6 percent sales tax on groceries generates about $270 million annually. Glover proposed reducing the tax to 1.5 percent over four years, which Wilson said would trim about $200 million from general revenue. The remaining 1.5 percent would encompass the seven-eighth-cent sales tax approved in 2004 for school improvements, a one-eighth-cent conservation tax passed by voters in 1996 and a half-cent tax imposed in 2000 to make up for revenue lost by a homestead exemption to property taxes. Any local sales taxes also would remain in place under Glover's proposal. Glover said he had discussed his proposal with Beebe. Sen. Denny Altes, R-Fort Smith, said he would propose an immediate reduction in the grocery tax to 3 percent. Wilson told lawmakers Altes' plan would reduce state tax revenues by about $135 million annually. Sen. Paul Miller, D-Melbourne, said he supports cutting or repealing the sales tax on groceries, but he expressed concern that Altes' plan failed to include how the state would make up the loss of revenue. "I'm on board with trying to exempt the tax on groceries, but ... when you take $135 million out of the budget you've got to replace it some way or another," Miller said. Rep. Horace Hardwick, R-Bentonville, also has proposed a plan to reduce the sales tax on groceries during the 2007 session. Wilson told the committee Hardwick's proposal is similar to Glover's, but would phase out the 4.5 percent in a slightly different fashion. However, it would come over a four-year period, like Glover's. Other possible tax cut measures also were discussed during Thursday's meeting, including a proposal by Altes to cut the state's capital gains tax by 30 percent. The Legislature in 1999 cut the capital gains tax 35 percent. Altes also proposed a back-to-school tax-free holiday where clothing and footwear would be exempt from the sales tax, which he estimated that would cost the state about $1 million. Altes said 16 states currently have such days, including neighboring Missouri, Tennessee and Texas. Glover discussed repealing the gross receipts tax on mini warehouse and self-storage rental services, which he said would take about $2 million annually from state coffers. Reps. Jeff Wood, D-Sherwood, and Tommy Roebuck, D-Arkadelphia, also discussed a proposal that would exempt officers in the Arkansas National Guard or regular U.S. military from paying income taxes on the first $9,000 they earn. A 2005 law exempted enlisted service personnel and Guard troops guardsmen from paying income taxes on the first $9,000 of their wages. Maj. Gen. Ron Chastain, the state's adjutant general, told the committee that since the Legislature approved the tax relief for enlisted personnel, the number of new recruits has increased dramatically. Chastain said he could not say for sure that the exemption caused the rise, but said he thought it might have contributed. |
