By Michael Wickline
Arkansas Democrat-Gazette
February 14, 2007
Without fanfare, the Arkansas Senate on Tuesday sent to Gov. Mike Beebe the largest tax cut in the state’s history, one of the governor’s top priorities.
Senate Bill 185 would reduce the state sales tax on groceries from 6 percent to 3 percent, effective July 1. Local sales taxes would remain. Prepared food, such as that served in restaurants, would continue to be taxed, as would tobacco products and alcoholic beverages.
Beebe has said there is a moral imperative to freeing groceries of the state sales tax because it’s a tax on people’s basic necessities.
The tax cut would save each household about $50 a year per person and reduce state revenue by $122.1 million in the fiscal year starting July 1 and $131.2 million in the one starting in July 2008, according to the state Department of Finance and Administration.
The largest previous tax cut was an income-tax reduction enacted in 1997, state officials said. Billed originally as a $70 million cut, a computation by the state after the legislation was enacted concluded it amounted to a $90 million tax reduction.
“The legislative process of making real this historic tax relief is complete, and Arkansans can now look forward to the reality of lower grocery bills beginning July 1,” Beebe said.
“Cutting the grocery tax has been a centerpiece of my agenda, second only to education, and signing this bill will fulfill a promise I made to all Arkansans,” he said.
The Senate finished legislative action on the sales-tax measure by concurring with two House amendments which merely added House sponsors to the bill. Then the 35-member Senate voted 35-0 to send the measure to Beebe, the same vote by which it originally passed the bill on Jan. 30. There was no discussion, no applause.
When the 100-member House approved the bill 99-0 with one representative absent last Friday, it gave a standing ovation.
Sen. Bobby Glover, D-Carlisle, the bill’s lead sponsor, said of the absence of Senate hoopla: “I guess the excitement pretty well vanished as far as knowing what was going to take place … It was just a matter of a formality now and finishing the job. We made history today and the people of Arkansas should be very proud of our governor and the Legislature.” Beebe pledged during his campaign last year to seek elimination of the sales tax on groceries, phasing it out over time. He called that the most responsible approach, rather than eliminating the tax all at once. He also has indicated that the one-eighth percent sales tax that was adopted by the voters in constitutional Amendment 75 may have to remain since it was levied by that amendment rather than statutory law.
Tuesday’s Senate vote followed last week’s agreement between Beebe and House Speaker Benny Petrus, D-Stuttgart, on a three-pronged tax-cut deal that cleared the way for the House’s approval of the main element of the governor’s tax-cut plan.
Although the tax-cut agreement involves three cuts, Beebe and legislative leaders support five tax-cut bills which combined would reduce state revenue by $197.5 million in fiscal 2008 and $220.9 million in fiscal 2009, the finance department said.
Beebe spokesman Matt De-Cample said late Tuesday the governor would sign the grocery tax-cut bill in a 10 a.m. Thursday ceremony in the governor’s conference room. That will allow former Sen. Bud Canada, D-Hot Springs, to attend, DeCample said. The governor wants Canada there because he championed eliminating the state sales tax on groceries and served in the Senate with Beebe, DeCample said.
The tax cuts are occurring as masters appointed by the state Supreme Court are reviewing the Legislature’s actions in last April’s special session to determine whether the state is adequately financing public schools for the state’s 450,000 pupils.
Glover said in an interview that he’s not worried about the Legislature voting for tax cuts before the Legislature settles public school funding issues in the current legislative session.
Beebe’s proposed budget “still by a long shot recognizes public education as the No. 1 priority for Arkansas by far,” Glover said. “I would think that the amount of money that he is putting into public education is probably more than what really we would have to put into there to hopefully satisfy the court. I think he has gone the extra mile on doing that.” Although key details remain to be seen, Beebe has recommended more of an increase for schools than the Legislature’s adequacy committee proposed.
DeCample said education was the first issue addressed when the governor developed his balanced budget plan. He pointed to Beebe’s recommending $19 million more for the public schools than the Educational Adequacy Committee recommended.
“The details of the tax cut came together first, but education is still the governor’s top priority and the state’s top priority,” DeCample said.
The other two bills in the Beebe-Petrus tax-cut agreement would reduce the sales tax on energy used by manufacturers and make it unnecessary for more Arkansans to pay state income tax.
The House Revenue and Taxation Committee on Tuesday recommended approval of House Bill 1420 by Rep. Allen Maxwell, D-Monticello, which would cut the 6 percent state sales tax charged to manufacturers for their natural gas and electricity use to 4.5 percent on July 1, 2007, and to 4 percent on July 1, 2008.
The bill would reduce state revenue $20.2 million next fiscal year and $30.5 million the following fiscal year, the finance department said.
The House tax committee tabled a similar Senate bill, which passed that body last week. House leaders said they want that aspect of the agreement to originate in the House.
The income tax piece of the tax-cut deal would exempt poor Arkansans from paying state income taxes and would offer additional tax credits to those living just over the federal poverty line. Rep. Keven Anderson, R-Rogers, said the House tax committee, of which he is chairman, would consider that bill, House Bill 1443, on Thursday.
The bill would reduce state tax revenue by between $14 million and $14.5 million in the fiscal year beginning July 1, 2007 and an estimated $16 million the following year.
OTHER ACTIONS
The House on Tuesday sent to the governor two bills regulating Arkansas higher-education institutions’ textbook writing and purchasing.
The bills by Sen. Sue Madison, D-Fayetteville, are an attempt to stem the growing cost of college textbooks.
Senate Bill 27 would prohibit colleges and universities and their faculty from receiving gifts or services as an inducement for requiring students to purchase specific course materials. The House approved the measure 95-0.
SB30 would regulate the royalties professors earn on books they write if they require their students to purchase those books. The bill would require higher education institutions to establish guidelines for the use of those royalties. An earlier draft of the bill would have entirely prohibited professors from earning royalties from books they require their students to buy, but opponents saw that as a restriction on the ability of Arkansas professors – some of whom are renowned in their fields – to earn money from their books. The measure passed 92-3.