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Taxes/Government Spending

COVID-19 & GROCERY TAX

The COVID-19 pandemic has made grocery shopping a huge source of anxiety for many people. Anxiety, because people are afraid of getting the virus while getting food for their family.  Anxiety, because they don’t know if the store will have in stock what they need. And for an increasing number of people, anxiety over whether they can afford to buy groceries and still pay other bills.

With the economy coming to a crawl the number of people worried about how to pay for groceries must be increasing.

There are more now but there are always people who are in the difficult spot of having to worry about having enough money both for groceries and paying other bills. Some have lots of bills and make just a little too much to get public assistance and others refuse to give up independence by going on public assistance.

With grocery shopping now being an even bigger source of anxiety, we think it is time to revisit the issue of state and local sales taxes on groceries.

The sales tax rate, except on groceries, is 6.5% for the state, plus an average of 2.93% for local governments. This makes a combined average tax of 9.43%.

There is still a one-eighth percent (0.125%) state sales tax on groceries. Plus all local sales taxes apply to groceries.  That means the combined state/local average sales tax on groceries is 3.055%.

Some will say 3.055% sales tax on groceries isn’t much and you shouldn’t worry about it.  But consider this ….  the entire sales tax burden on any item in Arkansas was only 3% until 1983 when it increased to 4% and then the state and local politicians kept increasing the sales tax.

For many years there were efforts to exempt groceries from taxation. Those who wanted to exempt groceries from sales tax saw it as a misery tax. Those who wanted to keep the sales tax on groceries said groceries needed to be taxed to provide some stability to the tax base.

To complicate matters, cities and counties became authorized to levy sales taxes and the local governments didn’t want to give up any revenue. Any legislator who wanted to exempt groceries would face unhappy city and county officials.

With some legislators not wanting to give up the state sales tax on groceries and other legislators not wanting to offend their city and county officials, a new tactic was adopted by those who disliked the taxing of groceries.  Their tactic was to reduce the state’s portion of the sales tax on groceries.

The tax reductions were accomplished by former Governor Mike Beebe. He reduced the state portion a little at a time, year after year.  Beebe also proposed and got passed triggers that would further reduce sales taxes on groceries even after he was out of office. By cutting the tax a little year by year Governor Beebe reduced opposition among legislators who were more worried about the state budget than by the unfairness of taxing groceries.  Also, by leaving the local taxes alone Governor Beebe avoided opposition from two powerful organizations – Association of Arkansas Counties and the Arkansas Municipal League.

Why does the state still impose some sales tax on groceries?  There is a one-eighth percent (0.125%) state sales tax in the Arkansas Constitution. The money goes primarily to Game and Fish and Parks and Recreation. This small tax is harder to remove. How might you go about exempting groceries from state tax?

  • One way would be to amend the constitution to exempt groceries from the tax (or perhaps to repeal the tax), but no legislator has been interested enough to propose such a change to go on the ballot.
  • The other way to exempt groceries from the tax would be by a simple act of the legislature to declare groceries exempt from the sales tax law, but to do that would also exempt groceries from local sales taxes which would make the Association of Arkansas Counties and the Arkansas Municipal League very angry.

So, if someone asks you why there are state and local sales tax on groceries, you can tell them – because the Association of Arkansas Counties and the Arkansas Municipal League wants to tax your groceries.

We think groceries should be exempted from both state and local taxes.  If that is not possible then measures should be adopted to limit the application of local sales taxes to groceries, such as: 1. Prohibit any new local sales tax from applying to groceries; and 2. Allow local governments (or their citizens by initiative) to exempt groceries from existing sales taxes that are not dedicated to a bond issue.

BEWARE, there are still state politicians who are hoping for the chance to put the full sales tax rate back on groceries, because even in bad times like the COVID-19 pandemic people have to buy groceries.

In 2018, the legislative task force requested by Governor Asa Hutchinson and chaired by his nephew, Senator Jim Hendren, decided to put on its list for consideration the possibility of re-imposing the full state sales tax on groceries.  Governor Hutchinson didn’t want to rule it out and held out until every other candidate for governor (Republican, Democrat, and Libertarian) had announced opposition to the idea.[i]

YOU KNOW WHERE CONDUIT STANDS ON THE ISSUE. WE THINK THE GROCERY TAX IS A MISERY TAX. 

WHAT DO YOU THINK? IS IT A MISERY TAX OR IS IT A GOOD WAY TO HELP FUND GOVERNMENT EVEN IN TIMES OF PANDEMIC?


[i] https://conduitforaction.org/governor-stands-alone-on-grocery-tax/

4 Comments

  1. Give us a historical list of sales tax exemptions on both goods and services granted by the legislature or passed by voter initiatives over the years. I’m sure it might surprise a lot of people. Repealing some of these exemptions might make it possible to lower the sales tax rate without hurting state revenues.

  2. Do you want property taxes or income taxes for local government and cops? Sales taxes mean LRAFB students pay for the cops if they have too much fun at the strip club.

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