PEOPLE HAVE TO EAT

 

"Market-based economists have opposed the taxation of food for more than 200 years ... The outstanding example is France in the (late) 18th Century .... French economist A.R.J. Turgot (1727-1781) ... attempted to stop the French government's dependence on sales taxes and the corve', a form of forced labor used against the poor." Policy Foundation research memo, 2002

 

(January 1, 2019) The state grocery tax--6.0% as recently as mid-2007--is being reduced to 0.125%1 as Arkansas joins 36 states2 with similar policies.  A small group of Arkansans have advanced repeal for at least a quarter-century.

 

Bud Canada (1990s)

 

Arkansas legislator Bud Canada (1925-2009) was closely associated with efforts to repeal the sales tax on groceries in the 1990s.  Canada, a member of the Univ. of Arkansas Razorbacks football team that won the Southwest Conference championship in 1946 represented Hot Springs as a Democrat. Canada "tried numerous times in numerous sessions"3 but grocery tax proponents argued the state could not afford the loss of revenue.4 He advanced a moral argument against the grocery tax.

 

Axe The Food Tax (2002)

 

A 2002 proposal5 to repeal the grocery tax was defeated by Arkansas voters.

 

Arkansas Democrat-Gazette Editorial Page

 

The Arkansas Democrat-Gazette's editorial page also advanced a moral argument against the grocery tax under Pulitzer Prize winner Paul Greenberg.

 

Policy Foundation Role

 

The Policy Foundation published 10 research memos on the issue (2002-2009),6 advancing the idea that taxing food was a regressive policy. The Wall Street Journal's editorial page cited the Foundation's work in a 2007 editorial.

 

"The Arkansas Policy Foundation estimates that a family of four will save $234 a year on grocery bills alone, a significant savings in a state where the average taxpayer shells out $3,088 a year in state and federal taxes."  Wall Street Journal, (February 13, 2007)

 

Gov. Mike Beebe

 

Gov. Mike Beebe (2007-15) served with Canada in the state Senate and supported gradual repeal of the grocery tax.  In February 2007, Gov. Beebe signed into law a bill7 that reduced the grocery tax by 50%, from 6% to 3%. The sponsor, state Sen. Bobby Glover, D-Carlisle, cited the Policy Foundation's research when the bill was considered by the Senate. Gov. Beebe explained his support for the idea at a January 2008 Foundation forum in Little Rock. State surpluses helped pay for the reduction. The rate dropped to 1.5% (2011), setting the stage for this year's reduction.  The tax cut relied on a fiscal trigger that linked paying off bond obligations and resolving decades-old desegregation litigation involving the Little Rock School District.

 

Arkansas officials recently termed the tax cut the largest in state history.8

 

Conclusion

 

Market-based economists have argued for centuries that food taxation is a regressive tax that falls disproportionately on poor and low-income households.  The successful reduction of the Arkansas grocery tax provides lessons for citizens. These include the importance of moral authority, sound research and working in a civil, non-partisan manner.

 

-- Greg Kaza


1  Arkansas voters approved a conservation sales in 1996 that designates 1/8th of 1% of the state's general sales tax for conservation purposes.  https://www.agfc.com/en/about-agfc/our-mission-and-history/

2  Alaska, Arizona, California, Colorado, Connecticut, Delaware, Florida, Georgia, Indiana, Iowa, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oregon, Pennsylvania, Rhode Island, South Carolina, Texas, Vermont, Washington, West Virginia, Wisconsin and Wyoming exempt grocery sales. Among these states, grocery taxes are subject to local taxes in Arkansas, Georgia, Louisiana and North Carolina. Federation of State Tax Administrators, "State Sales Tax Rates And Food & Drug Exemptions" (As of Jan. 1, 2018)

https://www.taxadmin.org/assets/docs/Research/Rates/sales.pdf. 

3  One example was SB6 in the 82nd General Assembly (1999).

4 Arkansas State Senate, "Senator Bud Canada Was a Leader in Tax Relief for Ordinary People," Dec 28, 2009

5  The measure was supported by Jackson T. "Steve" Stephens, Jr., former Chairman of the Policy Foundation.

6 (October 2002) Free Market Economists and the Sales Tax on Food and Policy Backgrounder: Sales Tax Repeal on Food; (December 2006) Foundation Releases Grocery Tax Proposal and Road Map for Arkansas Prosperity: Phase-Out the Sales Tax on Groceries; (January 2007) A Middle Class Tax Cut; (February 2007) The Biggest Tax Cut In Arkansas History; (June 2007) Tax Cut Countdown; (July 2007) Delta Food Prices Stable after July 1 Grocery Tax Cut; (November 2008) Fiscal Discipline and the Beebe Grocery Tax Cut Proposal; and (February 2009) Three Year Grocery Tax Cut Impact: $827 For Four-Person Household.

7  SB 185 (PA 110 of 2007)

8  Arkansas Democrat-Gazette, Dec. 30, 2018. "Arkansas grocery shoppers, low earners to get tax relief in '19."