The Case for Eliminating the Arkansas Grocery Tax

The state of Arkansas is abuzz after newly re-elected Governor Mike Beebe announced his intentions last week to cut the Grocery Tax by 0.5%.  Arkansas News reports that the Grocery Tax has already been cut from 6% to 2% under Beebe’s direction.  However, in 2006, eliminating the Grocery Tax was the cornerstone of Beebe’s campaign platform. So what’s the hold up?

Lawmakers on both sides of the aisle in the Arkansas Legislature have voiced concerns about the impact of eliminating the grocery tax altogether due to the perceived negative impact on state revenues.  But we need to take an objective look at the viability of this tax as a long-term source of revenue.  Furthermore, what is so taboo about government living with less? I seem to recall a recent referendum on the scope & size of government. I believe the answer was: “Government is too big.” Lastly, there is an important moral issue to be considered—a grocery tax undeniably punishes low-income families disproportionately. So why are politicians unwilling to eliminate this tax altogether?

The Center on Budget & Policy Priorities (CBPP) reports that Arkansas is one of only 19 states that does not exempt “most food purchased for consumption at home.” They also point out that relying on grocery purchases as a source of long-term revenue is problematic as more & more families are eating out more frequently.  In 1960, the average U.S. family spent 17 cents of each consumption dollar on food for home consumption; by 1995 the average family spent only 8 cents of each dollar on food eaten at home.  If we must have the revenue, the Legislature needs to find a different stream as this source will continue to diminish.  But couldn’t the state government learn to live with less?

A very few weeks ago, the American people spoke loudly & clearly: “government is too big & it needs to learn how to live with less.” Arkansas was no exception.  Fiscal conservatives were voted in statewide, including historic gains in the constitutional offices.  Elected officials everywhere have a mandate to tighten the belts of government—that means cutting spending & cutting taxes.

We should also consider that eliminating the grocery tax, therefore leaving more money in the pockets of consumers, may lead to a decrease in food stamp claims, relieving some of the budgetary concerns. What sense does it make to tax a family at 2% on their groceries, only to return a portion of that money back to them in food stamp benefits, while paying a government employee to process the claim? Increase the earning power of the individual, take some of the burden off of the system, and see what happens.

The budgetary quibbles are unending, but there is also an important moral issue to be considered: a grocery tax is a regressive tax that truly hurts the poor. The Left is always quick to malign Fair Tax proponents for wanting to crush the poor with a “23% tax increase.” Of course this is patently false, but where is their battle cry now that the poor are truly being disproportionately harmed by a grocery tax?

In 2008, the Southern Agricultural Economics Association conducted a study on the economic impact of repealing Mississippi’s (a state akin to Arkansas) grocery tax that currently stands at 7 percent.  They found that grocery taxes do in fact disproportionately affect the poor: according to the Consumer Expenditure Survey, low-income households spend about 65% of their food budget on food at home.  This is a national average of about $5,931 per year.  Taxed at a rate of 2% (the current grocery tax rate in Arkansas), that is $118.62 per year in taxes on groceries—no small amount for a poor family of three or four.

It is time for politicians on both sides of the aisle to get serious about addressing this issue.  “Helping the poor” is a great campaign slogan, now what are you willing to do about it?

Governor Beebe’s efforts thus far are laudable—now it’s time to follow through.  A grocery tax is punishing those who are suffering most during this economic downturn.  And government can always live on less.

This article was originally published in The Liberty Bell on November 19th, 2010.

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Nicholas Horton is the Editor of The Arkansas Patriot & former Searcy City Council candidate.  In his spare time, he volunteers with various political campaigns & writes for The Liberty Bell.  Contact Nicholas at arkansaspatriot@gmail.com & follow him on Twitter.

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