Tax Exemptions: Tricky To Deny, Hard On Poor Folk
A long-time veteran of the House Revenue & Tax Committee, former State Rep. Charles Stewart of Fayetteville, once told me that ‘everyone has a great reason for a tax exemption, but somewhere, you have to say no.’”
No one publicly thought revising the state’s tax code or at least trying to do so on an interim basis would become such vitriolic campaign fodder — at least in the GOP primary.
But it has.
The chairman of the 16-member task force, State Sen. Jim Hendren, R-Sulphur Springs, is fending off criticisms of the work done so far – and the work yet to be done, from sharp jabs from the GOP’s far right challenger for governor Jan Morgan of Hot Springs.
She and other conservatives are loudly decrying the work to be done before the Sept. 1 deadline for a report to be issued.
This past week, the panel quietly revealed 43 sales tax exemptions under review.
The list has quite a laundry list of everything, from keeping the last visages of the sales tax on groceries, to increasing the sales tax on used cars under $4,000, to nixing the exemption of bailing twine used in the production of tomatoes.
That last item, exempting the tax on tomato twine, is an estimated tax exemption of state taxes totaling $2,641 each year.
As the tomato twine takes the virtual last place on the list, it will no doubt be a top priority to save that exemption by State Rep. Jeff Wardlaw, R-Hermitage, the past chairman of the Pink Tomato Festival in Warren and Bradley County.
And so it goes with virtually every sales tax exemption being studied by this commission.
A long-time veteran of the House Revenue & Tax Committee, former State Rep. Charles Stewart of Fayetteville, once told me that “everyone has a great reason for a tax exemption, but somewhere, you have to say no.”
Saying “no” may be a new word to many on this exemption list. Some of these sales tax exemptions — well most of them — certainly pre-date the rise of the Arkansas Republican Party, gaining control of the state House, state Senate and the majority of the state’s constitutional offices — especially that of Governor.
And therein lies the rub. Gov. Asa Hutchinson loves a tax cut.
He ran on cutting the taxes on middle income Arkansans. And to his credit he has been able to “reduce” that tax burden — but really not cut that tax burden as much as he would to have cut taxes.
Gov. Hutchinson wants — very enthusiastically —– to reduce the top income tax rate of 6.9 percent on those earning more than $75,000 a year to a flat six percent.
How can he do this? He cannot do this without removing some — if not many of these 43 sales tax exemptions — or with some sleight of hand maneuvering of the Legislature to put some of the tax reductions on the sales tax of food back on the taxpayers.
Some have suggested the implementation of an earned income tax credit for the working poor. The more the poor folks work and stay employed — especially at the poverty line of wages less than $10 an hour in Arkansas — the less they will have to pay in state income taxes.
There are two schools of thought on this.
One is that the working poor should not have to pay income taxes if they stay working.
The other is that the working poor might get back more taxes from the state than they have paid in during the preceding year. That last theory is a non-starter for the GOP almost from top to bottom of the political party.
Will the tax cut from 6.9 percent to 6.0 percent for top wage earners of over $75,000 a year occur?
That is yet to be seen, especially when this tax overhaul commission must find the $180 million a year needed to do so.
Maybe cutting the tomato twine exemption is a start.
Or seeing if Legislators can find a used car for under $4,000 they would drive.
We shall watch and see the push and pull for repealing these exemptions.