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Lawmakers Consider Proposals to Increase Grocery Tax, Eliminate Tax Holiday

On Wednesday morning the Arkansas Tax Reform and Relief Legislative Task Force met to review proposed changes to the state’s sales tax exemptions.

The task force cannot make any official changes, but it can make recommendations to the Arkansas Legislature ahead of the next legislative session in 2019.

Among the changes under review are an increase in the state grocery tax; repealing sales tax exemptions for nonprofit hospitals and nursing homes; eliminating the state sales tax holiday; and reducing some of the taxes collected on new or used cars.

Bad Idea: Eliminating the Sales Tax Holiday

In 2011 the Arkansas Legislature created a back-to-school sales tax holiday. During the first weekend in August, the state doesn’t collect sales taxes on school supplies, instructional material, and clothing sold for less than $100. Missouri, Tennessee, Oklahoma, Texas, and Louisiana have similar tax holidays.

Family Council supported the sales tax holiday in 2011, because it benefits families — including home school families — shopping for the upcoming school year. Eliminating the state sales tax on school supplies for one weekend is like giving families a 6% – 7% discount as they do their back-to-school shopping.

The task force is considering a proposal to eliminate the tax holiday. Some lawmakers may not feel like the sales tax holiday does much, but a lot of parents would beg to differ.

Bad Idea: Taxing Sales to Nonprofit Hospitals and Nonprofit Nursing Homes

Currently, sales to nonprofit hospitals, sanitariums, and nursing homes are not taxed in Arkansas. In December consultants for the state singled-out these sales tax exemptions, saying they cost the state millions of dollars in revenue.

Many nonprofit hospitals and nursing homes are faith-based. They offer people more than just medication and healthcare, and they may operate on budgets that are so tight they would have to shut their doors if they were taxed at the same rate as corporate healthcare facilities.

The task force is considering a proposal to tax sales to nonprofit hospitals and nonprofit nursing homes. Our state needs to think twice before increasing the tax burden nonprofit hospitals and nursing homes carry.

Bad Idea: Increasing the Grocery Tax

From 2009 – 2013 Family Council supported Governor Beebe’s effort to reduce and ultimately eliminate Arkansas’ sales tax on groceries. People shouldn’t be penalized financially for buying basic necessities like bread and milk.

Currently, groceries in Arkansas are taxed at a reduced rate of 1.5%. However, the Arkansas Tax Reform and Relief Task Force is considering a proposal to impose the full sales tax on groceries — 6.5%.

That means if a family of four buys $100 worth of groceries every week, their sales tax would increase from $1.50 to $6.50.

Over the course of a year, that family will end up paying an extra $260 in taxes — just so they can put food on the table at home. The legislature may be able reduce the impact of these taxes in other ways, but any increase to the state’s grocery tax is going to add financial strain to a lot of households.

Good Idea: Cutting Taxes on New or Used Cars

Family Council supports efforts to reduce the state sales tax on new and used cars, because parents with young children often cannot afford expensive vehicles, and the used car tax makes it harder for them to purchase a safe, reliable car for their family.

From 1997 – 2011, the state did not collect sales tax on used cars sold for less than $2,500.

In 2011 Family Council successfully lobbied lawmakers to cut taxes on used cars. Under that law, taxes are not collected on new or used vehicles sold for less than $4,000.

Now this legislative task force is reviewing a proposal to stop collecting state sales tax on new or used cars sold for less than $10,000. That sounds like a good idea to us!

Conclusion

You can find a full list of the task force’s tax reform proposals here.

If you are concerned about any of these tax proposals, contact your state representative and state senator.

If you need help contacting your legislators, call our office at (501) 375-7000.

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